OVERVIEW – Recent price action has been quite volatile, but less a function of any specific fundamental catalyst and more attributed to some key levels being broken in the FX market. The most significant technical development has been the clear break below the 200-Day SMA in Eur/Usd. The pair had been very well supported on dips to the longer-term SMA over the past several weeks, and the break below now warns of a material shift in the structure, in favor of additional USD gains over the coming months. Traders should now be aware that there is a major shift underway and our recommendation is therefore to look to take advantage, by fading any other strong trending markets up to this point. In our opinion, this translates into buying the major currencies against the Scandis. The NOK and SEK have had exceptional runs against the majors (USD, Eur, Swissie, Sterling), and we believe that we should start to see some notable weakness in the regionals, which should ultimately result in higher major/Scandi rates.

Eur/Sek pullbacks should be well propped in the 10.05-10 area with the market in the process of carving a meaningful base on the daily chart. The market has been in the process of carving out a series of higher lows and higher highs and we look for a fresh higher low at current levels ahead of the next upside extension towards 10.60-70 further up. Back above 10.25 will however be required to get things going, while a close back below 10.10 is concerning. 

Eur/Nok has come back under pressure over the past several days with the market trading down to a 12+ month year low below 8.20. However, despite the weakness on the cross, we are not convinced of these moves and continue to see value at current levels with the market more likely to bounce from here rather than to continue to drop. Daily studies confirm with the RSI now dipping back into oversold territory. Look for a break back above 8.22 to confirm and accelerate.

Usd/Sek our view is highly constructive at current levels and favors continued USD appreciation over the coming weeks.  We contend the market is attempting to carve out a major base rather than in the process of some bearish consolidation. Any setbacks are expected to be well supported ahead of 7.00, with a break back above 7.18 to confirm bias and accelerate gains.

Usd/Nok has retraced since triggering a major double bottom. However, our core bias is still highly constructive and we look for any dips to be well supported in the 5.60 area.  Look for a higher low to carve out ahead of the next upside extension beyond 5.90 over the coming days. 

Gbp/Nok recovery rally has pulled back since reaching 9.53 in the previous weeks, but our outlook remains constructive, and a higher low is now sought out above 9.00, ahead of the next upside extension beyond 9.53.

Nok/Jpy has been well confined to a very choppy range trade over the past several weeks, largely defined between 15.00 and 16.50. Rallies have once again been well capped in the 16.50 area ahead of the latest retreat back into the mid-range. From here, we recommend continuing to play the range high-lows.
 

Written by Joel Kruger, Technical Currency Strategist for DailyFX.com
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