OVERVIEW – There is a slew of data out in the region today with Swedish consumer confidence and retail sales kicking things off, followed by the Norwegian unemployment rate. However all of this will no doubt play a second fiddle to the more anticipated Norges Bank rate decision due out later in the day at 13:00GMT. The overwhelming consensus is that the Norges Bank will become the first European central bank to raise rates since the onset of the global financial markets crisis, with a 25bp hike to 1.50%. The Norwegian economy has been exceptionally strong throughout the global recession and this has now put the Norges Bank in a position to need to raise rates. One senior economist says that it is a “trade-off between the need for higher rates to curb the acceleration in home prices and the strength in private consumption” and “the effect of the krone exchange rate on consumption.” Norway will need to proceed with caution, especially with the timing of today’s decision coinciding with a global market sentiment that has now turned for the worse.
EURSEK DAILY
Charts created using Bloomberg – Prepared by Joel Kruger
Eur/Sek continues to consolidate off of the 2009 lows from August and we contend that the market is in the process of carving out a medium-term base. Any setbacks are expected to be well supported ahead of 10.05, with a break back above 10.45 to confirm basing prospects and accelerate gains.
Eur/Nok fresh yearly low last Thursday by 8.24 but we feel that the market is finally now exhausted and on the verge of some major upside over the medium-term. Aggressive players can get long at current levels, with a break back above 8.40 accelerating. Only back below 8.30 would delay.
Usd/Sek traded down to a fresh yearly low by 6.75 on Monday ahead of the latest sharp reversal to set up a bullish outside day formation on Monday. Despite the underlying downtrend, our view is nevertheless constructive at current levels 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. Monday’s bullish reversal day should get things going but ultimately a break back above 7.10 will be required to officially shift the structure.
Usd/Nok is in the process of consolidating just off of the yearly lows by 5.50. However, given the medium-term stretched technical studies, we favor the risks for significant upside over the coming weeks with the market now in the process of attempting to carve out a meaningful base. Any additional setbacks should therefore be limited with the latest break and close back above the 20-Day SMA helping to reaffirm bullish outlook.
Gbp/Nok finally showing signs of recovery after basing out by 8.82 in the previous week. Daily studies show plenty of room for additional corrective upside, and we look for a push back towards 9.50 over the near-term. Setbacks should now be well supported ahead of 9.00. Look for a fresh upside extension on a break back above 9.30.
Nok/Jpy as had be warned, the market was well overextended above 16.50 and the market has since put in a bearish outside day on Monday. Look for the reversal day to mark a top by 16.63, with deeper setbacks now favored back towards initial support by 16.00 over the coming days. Only back above 16.63 negates.
Written by Joel Kruger
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