OVERVIEW – The regional currencies continue to show signs of major topping against the Euro and USD, with both the NOK and SEK back to testing key multi-day range extremes. The rebound in the USD on the back of some global instability, and uncertainty over the outlook for the global economy has no doubt negatively impacted the Scandis, which have been very highly correlated to risk appetite. Additionally, the added strain of some profit taking in commodities has not helped the cause. Also seen putting pressure of late has been the latest downgrade of Greece by Fitch, along with Moody’s warning of the risks associated with ballooning government deficits. Technical studies have been confirming and point to a fresh wave of Nordic selling in the weeks ahead. For now, all eyes turn to Swedish industrial production due out in a few hours.  

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 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 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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