Scandinavian FX is looking exciting
USDNOK has made a key technical break through the range support in place from January at 8.383. NOK is a significant beneficiary when spot crude moves higher which it has been doing. Also, OPEC+ look to downgrade next week’s meeting to a ‘monitoring’ meeting, subsequently reducing the prospect of output increases and helping crude prices remain firm. The USD seems to also be losing steam despite solid data and cyclical commodity FX are seeing strong moves. Buoyant equity markets aid NOK too given it’s high-beta to risk sentiment. Norway’s Central Bank are also a lot more hawkish, so the currency should benefit further from tightening in that respect. The Eurozone growth outlook is becoming brighter with the pick up in vaccinations and would be another tailwind in favour of USDNOK moving lower. On the Domestic data front there’s no impactful events lined up.
With the break below range support we could see traders begin to implement a short the rallies approach with moves into the 21-day EMA as a potential trigger point. The 21-day EMA has crossed below the 50-day SMA. The next support level lower from here is 8.20. The RSI is in oversold territory so potentially we may see a bounce back to the former range support which could become resistance around 8.383. For me a move back into the range and a breach back above the range resistance around 8.68 would change the trading bias.
Over in Sweden a similar scenario is playing out as the fate of the Eurozone economy turns up. Sweden are big exporters and benefit from an improvement in the global growth story as well as spillover effects from its close neighbours, Europe. The economy still remains more open with higher levels of mobility than most despite the high covid cases. Domestic data won’t be throwing any curve balls our way either.
Price has bounced off the 8.35 support level and the RSI looks to be trying to curl slightly back upwards as it eyed oversold levels. For those that like patterns we could be in the early stages of a head and shoulders pattern (which typically resolves to the downside). Zooming out to a weekly timeframe we see a bearish flag pattern – more evidence of a bias to see potential moves lower in USDSEK. A break below the 8.35 support could open up the 8.25 support. If we see a bounce higher I’d monitor the 8.50 region around the 21-day EMA and 50-day SMA.