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Swedish Inflation Data on Tap; Risks for Relative Weakness
Written by article default Tuesday, 12 October 2010 08:23
OVERVIEW – Softer inflation data out of Norway on Monday could be adding to mounting pressures against what has been a very strong krone, while the krona could come under similar pressure on Tuesday with its consumer price index due out at 7:30GMT. There is no doubt that the strength in the local currencies could be starting to weigh on the economies as exports suffer from the appreciation. We would not at all be surprised to see some corrective selling and relative weakness in the regionals over the coming days and weeks to help offset the fallout from the unwelcome currency strength. A good deal of the demand for these currencies has come on the back of some broad based USD weakness, rallying commodities, and recovering global equities markets, and we feel that here too, the risks are for a reversal, which further adds to the case for short-term Scandi depreciation.Eur/SekAlthough the overriding trend is still intensely bearish, the market looks to have finally found some form of a base by 9.09 and appears to be in the process of carving out a major inverse head & shoulders bottom. From here, look for additional upside back towards a measured move objective by 9.50 over the coming days. Ultimately, only back below 9.13 would delay and give reason for concern.
Eur/Nok Overall price action remains quite choppy with the market most recently stalling out ahead of the multi-day range lows by 7.80 and bouncing back to the range highs. From here, look for additional upside towards 8.20 over the coming sessions from where selling rallies is the favored strategy as the market adheres to the well defined range.
Usd/SekDaily studies are in the process of turning up from oversold, and the market could be looking to establish a material base by 6.60. Look for a daily close back above 6.73 to confirm bullish reversal prospects and open an acceleration back above 7.00 over the coming sessions. Inability to clear 6.73 will keep the pressure firmly on the downside for fresh yearly lows.
USD/NOK DAILY
Usd/Nok Although the overriding trend has been bearish, the market remains very well supported on a medium-term basis by 5.80 and we could now be seeing the formation of yet another base by the mentioned psychological barrier. Daily studies are in the process of turning up, and the risks from here are for some additional gains back above 6.00 over the coming sessions. Look for a close back above 5.86 to confirm and accelerate.
Gbp/Nok The market is content on some choppy consolidation for now and a break back above 9.40 or below 9.13 will be required to establish a clearer directional bias. Until then the best place to be is on the sidelines.
Nok/YEN Remains confined to a multi-day range broadly defined between 13.25 and 14.50. The market has most recently stalled out by the range highs, and as such, the preferred strategy is to look to sell in favor of a continuation of the prevailing range trade. Ultimately, a close back above 14.50 would be required to negate.
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