Scandi Daily 10.29

OVERVIEW – Despite the rate hike in Norway on Wednesday, the krone was very well offered on the back of some broad based currency liquidation and paring back of risk. The regional currencies were underperformers across the board with the krona getting hit even harder, on a less attractive yield differential and ongoing concerns over exposure to Eastern European markets and weaker than expected domestic data. The krona has been very tied to risk sentiment and any continued reduction in risk appetite should continue to weigh on the Scandi. The Nok should also come under some more pressure as investors’ interest rate expectations within the region become less aggressive. While the Norges Bank has been in a position to be able to raise rates, they also need to be conscience of rising asset prices and the threat of a double dip global recession. This is a point that has resonated with investors over the past few days.

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.  The latest break back above 8.40 now confirms and should accelerate gains towards 8.50-60.  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. 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. A break back above 7.10 should confirm bias and get things moving.

  

Usd/Nok has now officially carved out a meaningful low by 5.50 with the market racing higher on Wednesday to trigger a double bottom formation. The break back above the neckline at 5.66 now opens a measure move upside extension towards 5.80 over the coming sessions. More gains are seen on a break above 5.87.  Setbacks should now be well propped ahead of 5.60.

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 9.20.

Nok/Jpy as had be warned, the market was well overextended above 16.50 and the price has since collapsed into the well defined range. Deeper setbacks are now seen towards 15.50 over the coming sessions.

Written by Joel Kruger

Friday, October 30, 2009 | 1 comments | Read More

Currency Crosses: Technical Outlook

The EURNZD has rallied through 7 month trendline resistance and focus is now on 2.0750.  The Yen crosses have fallen rapidly from recent highs and the larger bullish patterns are in question.

Euro / British Pound

The EURGBP fell below .8985 but the decline may still be a 4th wave correction (I still favor a 5th wave advance through .9416 and maybe .9807).  Levels that could offer additional support are the 50% retracement of wave 3, which is at .8934 and the wave i of 3 high at .8843.  Coming below .8703 would signal that the larger trend is probably down.

Euro / Swiss Franc

“There is little to say about the EURCHF technically and there will not be until the pair breaks from the triangle. The fight between bulls and bears wages on in a triangle that has been underway since October. Triangles are typically continuation patterns, so a downside break seems more probable. Still, forecasting is an exercise in probabilities rather than certainties so jump the gun at your own risk. Pushing through either the top of bottom line triangle line would present a breakout opportunity.” The triangle count shown above is bearish but a bullish outcome is possible too. Wave a would be A and wave B would be a triangle.

Euro / Canadian Dollar

A head and shoulders top has been unfolding since January 2008.  The left shoulder was complex with 2 shoulders.  H&S patterns tend towards symmetry and I suggested last week that the EURCAD would rally to 1.6330 in order to form another right shoulder.  This scenario remains on track.

Euro / Australian Dollar

We viewed short term price action last week and concluded that “a rally above 1.6310 would break a series of lower highs, at least in the short term.  This would be the first sign of a bottom.”  The EURAUD did break higher and strategy is to now buy dips.  Support is 1.6310 and then 1.6240.

Euro / New Zealand Dollar

Last update was that “the EURNZD has bounced from a downward sloping line extended from the 6/22, and 8/14 lows (line also cuts through 3 days this month).  RSI has not confirmed the low (divergence), which leaves the downtrend weak technically and at risk of reversing.”   The EURNZD blasted through the multi month resistance line today, confirming a reversal.  Look to buy dips.  Support is 2.0240, 2.0110, then 2.0000.

Euro / Japanese Yen

Despite the significant decline in such a short amount of time, focus remains on the larger triangle pattern.  The next level of potential support is just above 132.  It certainly is possible that the rally from 129 is the last leg of strength that this pair sees in some time and that action since the Spring is distributive.  Whichever way the EURJPY decides to break in the coming weeks/months, the move should be substantial.

British Pound / Japanese Yen

The larger pattern depends on how the price pattern in the circled area is interpreted.  Treating that as a triangle and 5th wave thrust would indicate that the 5 wave rally from 139.68 is wave A of an A-B-C correction.  Treating the circled area as wave A and B of an expanded flat would indicate that the 5 wave rally is wave C and that a corrective rally is over.  The bigger picture is unclear but 147.05 is support (both structural and the 100% extension of 153.30-149.13.  149.60/80 is resistance.

Swiss Franc / Japanese Yen

The CHFJPY exceeded its 2009 high (barely), which was 91.56.  This fact should not be overlooked because the EURJPY failed to exceed its high (139.17).  This sets up a possible non-confirmation and potentially significant downside reversal.  Nothing is confirmed at this point of course.  87.20 is potential support.

Canadian Dollar / Japanese Yen

I am unsure of the action since early June but a triangle (similar to the EURJPY but lagging) could be unfolding.  The pair has dropped into a congestion area defined by 83 and 84.30.  Expect support at the lower end of the range.

Australian Dollar / Japanese Yen

I am unsure of the action since early June but a triangle (similar to the EURJPY but lagging) could be unfolding.  The pair has dropped into a congestion area defined by 83 and 84.30.  Expect support at the lower end of the range.

New Zealand Dollar / Japanese Yen

The NZDJPY reversed from a line drawn off of January, April, and June highs and is now testing channel support / that has held since the low as well as the 50 day SMA.  The battle lines are drawn.  Points to expect resistance are 66.60, 67.10, 67.60, and 68.05.

Written by Jamie Saettele

Friday, October 30, 2009 | 0 comments | Read More

Scandi Daily 10.28

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

Thursday, October 29, 2009 | 0 comments | Read More

Scandi Daily 10.27

OVERVIEW – The developments in price action over the past 24 hours have been most interesting, with US equities and currencies coming back under pressure and the USD benefitting across the board. While most have attributed the moves to some natural profit taking from an overextended market, others have begun to once again weigh the risks to the prospect for a double dip type global recession. The wide spread consensus is that the Norges Bank will indeed raise rates on Wednesday by 25 bps to 1.50%, but the Norwegian central bank may grow a little more anxious with oil prices retreating and risk aversion back on the rise. Any threat of shift back into a contractionary market environment will surely bode unfavorably to central banks looking to adopt a more restrictive monetary policy. As such, while the local economy has indeed outperformed and separated itself throughout the global downturn, the Norges Bank also needs to be careful that it doesn’t unnecessarily expose itself to a premature and overly restrictive policy shift. Looking ahead, the calendar is all Sweden centric with the release of producer prices and household lending data at 8:30GMT.

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. Initial resistance comes in by 10.22 with a break on Tuesday to reaffirm bias.

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 DAILY

Charts created using Bloomberg – Prepared by Joel Kruger

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. Despite the current 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 a break and close back above the 20-Day SMA 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

Tuesday, October 27, 2009 | 0 comments | Read More

Forex Options and Futures Support Calls for US Dollar Bottom, Euro Top

Forex Options and Futures markets show US Dollar sentiment at near-record bearish extremes against almost all major counterparts, and one-sided positioning suggests that the USD is near a major turning point. Today’s US Dollar pullback may in fact be the start of a bigger reversal. The key difficulty remains the timing of said turnaround, as US Dollar-bearish sentiment has remained extreme for quite some time now. According to our Senior Strategist, the Euro/US Dollar’s break below 1.4980 is the first sign of a top.

Volatility expectations have jumped considerably on recent US Dollar losses. We typically see important market turns when volatility is at or near its peak. Of course, guessing the peak for Forex Options Market implied volatility levels is a feat onto itself. As it stands, we recognize that the US Dollar may continue lower through short-term trading. Yet every further USD short only increases the likelihood of an important market corrections and-by extension-a Dollar recovery.

Euro/US Dollar Forex Options and Futures Forecast

Futures positioning shows that Non-Commercial traders (typically large speculators) had become extremely net-long the Euro against the US Dollar. In fact, said speculative positioning is was previously the most long it had been since the Euro traded near 1.6000 in early 2008. We consistently warn that extreme positioning and sentiment can and does remain extreme for extended periods of time. Yet it is interesting to point out EURUSD has set a noteworthy top.

British Pound/US Dollar Forex Options and Futures Forecast

Futures and Options sentiment paint a distinctively different picture for the British Pound against the US Dollar, as traders had actually grown extremely short the GBP against the USD. The GBPUSD very recently rallied on aggressive speculative short covering, and indeed Net Non-Commercial short positioning went from -65,346 contracts to -43,318 through the week ending October, 20. This fairly substantial shift is perhaps only the earliest stage of a larger unwind.

US Dollar/Japanese Yen Forex Options and Futures Forecast

Forex options markets show that traders are the most bullish the USDJPY (Bearish the Japanese Yen) in the past 90 trading days, while the longer-term trend in price shows we are in a fairly clear downtrend. The FX options market sentiment extremes suggest that we may have hit a USDJPY top and it is likely to continue its longer-term correction. The major caveat is that Futures positioning actually shows speculators still fairly short the USDJPY (long Yen), and a pullback in speculative interest could fuel a USDJPY rally. The mixed signals give us a fairly neutral bias on the USDJPY.

US Dollar/Canadian Dollar Forex Options and Futures Forecast

Traders have grown extremely net-long the Canadian dollar (short the USDCAD) through recent trade, with FX Futures data showing sentiment at its most bullish since the pair traded near parity. We have continued to call for a USDCAD reversal, and the very recent rally suggests we may have set a substantive USDCAD bottom. It stands to reason that a further unwind in positioning would result in further Canadian dollar losses (USDCAD rallies).

US Dollar/Swiss Franc Forex Options and Futures Forecast

Non-Commercial futures positioning on the US Dollar/Swiss Franc pair remains the most bearish in nearly 5 years-pointing to clear sentiment extremes. Swiss Franc long positions (USDCHF shorts) outnumber short positions by a over 20,000, and it is little surprise to note that the USDCHF trades very near parity. Yet the last time net-long CHF positions grew to this level was in December, 2004. At that point the USDCHF set an important low. Watch for further rallies.

Australian Dollar/US Dollar Forex Options and Futures Forecast

We continue to call for a sustained Australian dollar pullback, as sentiment has remained extreme for quite some time now. Non-commercial futures traders remain the most net-long the AUDUSD since the pair traded above 0.90, but the timing of said retracement remains extremely challenging. Forex options market sentiment has hit similarly overextended bullish extremes.

New Zealand Dollar/US Dollar Forex Options and Futures Forecast

The New Zealand dollar/US Dollar pair is quite similar to the AUDUSD, with significant sentiment extremes leaving the door open for near-term declines. As of several weeks ago, Net Non-Commercial positioning on NZDUSD futures remained the most net-long since the pair set noteworthy tops in July, 2007.

Written by David Rodriguez

Tuesday, October 27, 2009 | 0 comments | Read More

Currency Crosses : Technical Outlook

Near term, expect decent sized setbacks in Yen crosses. EURJPY support is concentrated near 135 and GBPJPY support at 148 and 147.

Euro / British Pound

Barring a break below .8995, I maintain that a 4th wave low is in place at the confluence of the 38.2% retracement of wave 3 / Elliott channel support / previous 4th wave extreme.  A move to a new high in wave 5 (above .9416) is favored.  .9075 is potential support 

Euro / Swiss Franc

“There is little to say about the EURCHF technically and there will not be until the pair breaks from the triangle. The fight between bulls and bears wages on in a triangle that has been underway since October. Triangles are typically continuation patterns, so a downside break seems more probable. Still, forecasting is an exercise in probabilities rather than certainties so jump the gun at your own risk. Pushing through either the top of bottom line triangle line would present a breakout opportunity.” The triangle count shown above is bearish but a bullish outcome is possible too. Wave a would be A and wave B would be a triangle.

Euro / Canadian Dollar

A head and shoulders top has been unfolding since January 2008. The left shoulder was complex with 2 shoulders. H&S patterns tend towards symmetry and I suggested last week that the EURCAD would rally to 1.6330 in order to form another right shoulder. This scenario remains on track. Price is testing the 200 day SMA today and near term studies warn of a pullback. 1.5600/60 is support. 

Euro / Australian Dollar

We viewed short term price action last week and concluded that “a rally above 1.6310 would break a series of lower highs, at least in the short term. This would be the first sign of a bottom.” The EURAUD has yet to break that level but additional reversal evidence can be gleaned from the weekly chart. A hammer (or key reversal on a bar chart) formation occurred last week and weekly RSI is below 30. Failure to hold the low would expose 1.5920/1.6040. 

Euro / New Zealand Dollar

The EURNZD has bounced from a downward sloping line extended from the 6/22, and 8/14 lows (line also cuts through 3 days this month). RSI has not confirmed the low (divergence), which leaves the downtrend weak technically and at risk of reversing. 

Euro / Japanese Yen

3 waves up from 129 look complete in the EURJPY. As such, a 4th wave is probably underway towards 134.75-136.10 (former 4th wave area). The 38.2% retracement of wave 3 is at 135.10 (lower portion of the zone). I’ll be looking for signs of a low near 134.75-135.10 in order to get long for wave 5, which will probably carry the EURJPY through 139.20 (new 2009 high). 

British Pound / Japanese Yen

I wrote Friday that “5 waves are clear from the 139.68 low so one would expect to find support in the former 4th wave, which is 147-149.40. The larger pattern depends on how the price pattern in the circled area is interpreted. Treating that as a triangle and 5th wave thrust would indicate that the 5 wave rally from 139.68 is wave A of an A-B-C correction. Treating the circled area as wave A and B of an expanded flat would indicate that the 5 wave rally is wave C and that a corrective rally is over. Given the USDJPY pattern (along with the EURJPY), the former seems more likely. Near term, weakness is favored regardless in order to correct the 5 wave advance.” Favor weakness near term with support coming in at 148.10 then 147.00. 

Swiss Franc / Japanese Yen

The CHFJPY is in the same position as the EURJPY. Favor weakness in wave 4 down to 88.80-89.70 before a push to a new high. 

Canadian Dollar / Japanese Yen

A new high (above 90.41) is expected eventually since the decline from there is viewed as a complex correction (a-b-c-x-a-b-c). As suggested last week, wave 4 may be unfolding as a triangle or flat (flat seems more likely). Coming under 85.91 would expose 85.30 (100% extension of what is wave a of 4). Only a drop below 84.23 would suggest that a more important top is in place. 

Australian Dollar / Japanese Yen

Daily RSI(14) has rolled over from above 75 and the rally from 76.30 can be treated as a completed 5 wave advance. Also warning of at least a setback is RSI divergence at the high. Initial support is 82.80, then 82.05. 

New Zealand Dollar / Japanese Yen

The NZDJPY reversed from a line drawn off of January, April, and June highs. Daily RSI has rolled over from an overbought condition. Favor at least a drop to test support, which is now 66.40. A longer term top would be signaled by a break below the support line extended from the February, July, and October lows.

Written by Jamie Saettele 

Tuesday, October 27, 2009 | 0 comments | Read More

Scandi Daily 10.26

OVERVIEW – This week’s monetary policy decision from the Norges Bank comes into focus, with the Norwegian central bank widely expected to raise rates by 0.25bps to 1.50% on Wednesday. The decision will be watched closely with the Nordic bank to emerge as the first European central bank to boost rates since the onset of the global financial markets crisis. Many will also be watching the close relationship between the NOK and SEK which could diverge significantly in favor of the NOK, especially after the Riksbank disappointed many hawks in the previous week by leaving rates on hold and maintaining their accommodative outlook well into 2010. Monday’s calendar is light with the only release coming in the form of Swedish trade balance at 8:30GMT.

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 remains under pressure for now, with the market still locked in an intense downtrend and breaking to fresh 2009 lows towards 6.75 thus far. However, we continue to retain a constructive outlook at current levels, with daily studies looking stretched and warning of a short to medium-term reversal.   Look for a break back above 6.84 on Monday to help reaffirm outlook.

Usd/Nok is back under pressure with the market matching the previous week’s trend/2009 lows by 5.51 ahead of the latest minor bounce. However, daily studies are looking stretched and we would not rule out the potential for the formation on a double bottom by 5.50, with a break back above the 5.67 area neckline to confirm and accelerate.

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.  

Nok/Jpy continues to extend gains now through the latest barriers by 16.50. However, daily studies are showing overbought and we would recommend that bulls proceed with caution. Short-term support comes in by previous resistance at 16.50 and a break below this levels would warn of a bearish reversal.

Written by Joel Kruger 

Monday, October 26, 2009 | 1 comments | Read More