OVERVIEW – As expected, any relative strength seen
in the NOK on Wednesday was easily negated in Thursday trade, with the
broad based USD rally forcing the a heavy bout of liquidation from long
NOK positions. The surprising decision by the Norges Bank to raise
rates by another 25bps to 1.75% had initially propped the single
currency, but the broader global macro price action and shift in USD
sentiment proved too much to ignore and a major double bottom formation
(see below) was triggered in Usd/Nok on Thursday. Also seen weighing on
the krone was some cross related selling in Nok/Sek ahead of some much
talked about barriers at 1.2500 and 1.2550. Swedish unemployment data
came in much stronger than expected, while Norwegian unemployment was
bang on consensus. Looking ahead, there are no scheduled releases in
the region on Friday and the markets will continue to cue off the
broader price action in the currency market. Our technical studies
point to additional weakness in the Scandis, both against the USD and
the Euro over the medium-term.
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. Latest price action reaffirms outlook with the market
finally taking out the multi-day consolidation highs by 10.53 to now
expose 10.60-70 further up.
Eur/Nok price action confirming our constructive
outlook and we favor of a bullish resumption back above key short-term
resistance at 8.57 over the coming days. A closer look at the daily
chart reveals the potential formation of a major bottom. Ultimately,
only below 8.24 negates.
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 7.40-50 further up. Any setbacks
are expected to be well supported ahead of 7.00.
Usd/Nok double bottom has now been triggered and the
break above the neckline is significant as it confirms that a major
bottom is now in place. The push above 5.85 now opens a measured move
extension back towards the 6.10-15 area over the coming days. Look for
any dips to be well supported now ahead of 5.70.
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 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 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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