OVERVIEW – The lack of any data on the domestic front over the past couple of days have left the regional currencies trading off of broader global macro themes and price action. We have seen a sense of trepidation creep in over the past several hours that has weighed on sentiment and forced some profit taking in the riskier and higher yielding currencies. Also see weighing on risk appetite has been the pullback in commodity prices with both oil and gold well off on the day thus far. These developments have thereby resulted in some unfavorable price action for the NOK and SEK with both currencies underperforming across the board on the day. Our core view is one that projects additional Scandi weakness over the medium-term, with the overriding driver of our bias stemming from what appears to be a technically overbought regional market.

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 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 have turned up from oversold and show plenty of room to run.

 

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