OVERVIEW – The higher than expected inflation data in Norway on Monday helped to propel the NOK to fresh highs against the Euro, on the expectation that the Norges Bank will continue to look to tighten monetary policy. Much of the NOK and SEK buying in the early week was also a function of some broader USD selling. However, we continue to see room for Scandi weakness at current levels, with longer-term technical studies warning of major tops in both the NOK and SEK against both the Euro and USD. As such, we recommend looking to sell the nordics at current levels in anticipation of some major corrective pullbacks over the coming months.   

Eur/Sek pullbacks should be well propped in the 10.15 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 break 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. A break back above 8.25 is now required to accelerate gains. 

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. The recent break back above 7.20 confirms bias and exposes 7.50-60 further up. Any setbacks are expected to be well supported ahead of 7.00.

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 5.65-70 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. Pullbacks have once again been well supported in the 15.00 area ahead of the latest bounce back into the upper 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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