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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