OVERVIEW – The regional currencies are among the top performers on the day, with a resurgence in risk appetite and improved sentiment helping to bolster the Scandis. Oil prices have been well bid on the back of a record surge in gold, and this has helped to generate some relative demand for the NOK. Local data out of Norway has also been encouraging thus far this week, with consumer confidence exceeding expectations on Tuesday. Meanwhile in Sweden, the Riksbank has announced its plans to stop lending to the major local banks with the prospects for an economic recovery looking more sound. Nevertheless, we continue to see the risk for weakness in the nordics over the medium-term, with technical studies looking stretched. The fundamental catalyst for such weakness will likely stem from additional uncertainty over the outlook for the global economy.

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 8.56 over the coming days.  A closer look at the daily chart reveals the potential formation of a major double bottom. 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 with the market looking to carve out a major double bottom on the daily chart.  We do not anticipate a retest of the recent 5.50 lows and instead favor a bounce at current levels back towards neckline resistance at 5.85, a break of which will trigger the double bottom formation.

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. The latest pullbacks have once again been well supported in the 15.00 area and from here we would recommend to continue to play the range and look to buy in anticipation of a push back towards 16.00.  Daily studies are just turning up from oversold and show plenty of room to run.

 

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