OVERVIEW – The markets continue to show signs of a potential rolling over as currencies slowly lose their firm hold on the buck and begin to secede on the back of some ongoing concerns over the prospects for the global recovery and downbeat comments from the likes of President Obama, Germany’s Wisemen and US Treasury Geithner, who have all now warned of the risks for a double dip recession. While the OECD has upgraded its assessment on global growth, this development has hardly been offsetting with market participants very much concerned with overinflated commodity prices, as most clearly reflected through gold, which is still only just off of record highs in the mid-1100’s. We have also been seeing the onset of a new fear from investors who are now contemplating the possibility that the markets will start to falter as the impact of global stimulus measures begin to run out of steam. While the general consensus has been to keep current stimulus measures in place, there has been no real action to inject additional stimulus into local economies, with only some small exceptions. Many analysts have attributed the recent surge in global equity prices to the aggressive stimulus measures which have potentially distorted and overstated the current rebound. This has all taken its toll on the risk and commodity correlated regional currencies, and as we have written in our commentary over the past several weeks, warns of additional NOK and SEK deterioration ahead.

Eur/Sek pullbacks should be well propped ahead of 10.15 with the market in the process of carving a meaningful base on the daily chart. Look for the bullish reversal day on Tuesday to now open the next push back towards the recent range highs by 10.53. Only back under 10.15 concerns.

Eur/Nok despite the latest setbacks, we still view he overall price action as constructive since the market broke back above 8.41 in mid-October. Look for the price to be well supported ahead of 8.30, in favor of a bullish resumption back above key short-term resistance at 8.56 over the coming days. Ultimately, only below 8.24 negates.

Usd/Sek our view is still constructive at current levels despite the latest setbacks and favors 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 7.10 confirms bias and exposes 7.40-50 further up. Any setbacks are expected to be well supported ahead of 6.75, while back above 7.20 accelerates. 

Usd/Nok even with the latest pullbacks, we still retain a constructive outlook for the pair since triggering a double bottom back in mid-October.  We do not anticipate a retest of the recent 5.50 lows and instead favor a bounce at current levels by previous trend-line resistance now turned support. Look for a higher low to carve out in the 5.55 area to be confirmed on the eventual break back above 5.85 over the coming days. Next resistance comes in by 5.67.

Gbp/Nok recovery rally has pulled back since reaching 9.53 in the previous week, but our outlook remains constructive, and a higher low is now sought out above 9.00, ideally by 9.23, ahead of the next upside extension beyond 9.53.

Nok/Jpy as had be warned, the market was well overextended above 16.50 and the price has since retreated back into the well defined range. Deeper setbacks are now seen towards 15.50 over the coming sessions.  Rallies are expected to be well capped ahead of 16.20.
 

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