MARKET MOVER - BNP PARIBAS - Investment Services India

NOKSEK to extend downtrend
• Scandinavian currencies have been the out performers over the past week and in the case of SEK
over the past month
• The SEK uptrend has been accelerated with multi-year trendlines currently being tested; a break of
which will open further significant appreciation potential
• The NOK has remained supported, but the medium term technical position is less encouraging
than that of the SEK…
• …hence we expect NOKSEK to extend the major downtrend, especially given the sharp break
lower through long term support
The Scandinavian currencies have been the out
performers over the course of the past week and
in the case of the SEK the top performer among
the G10 currencies over the past month as well.
Technical indicators are still giving bullish signals
for the SEK and the break through key technical
levels suggests that the SEK has further upside
potential. Indeed, EURSEK is now testing long
term up trendline support currently intervening at
9.1065. A break below here will trigger another
bearish signal leaving EURSEK vulnerable to a
decline towards 8.9595 and then the 2005 low of
8.8800.
EURNOK has been keeping the pressure on
support in the 7.8405 and 7.8125 areas, which
represents the bottom end of the three month
trading range. A break below here is needed to
trigger a decline back towards the 7.6785 May
low. However, medium term technical indicators
have now started to develop positive signals with
both the 9-day and 9-week RSI moving higher.
Hence, the ability to hold above the
7.8405/7.8125 support is likely to see a EURNOK
rebound to test the major down trendline resistance
at 8.0120. A break above here will trigger a renewed
bullish signal opening upside potential towards the
8.2280 level, which is the peak from May as well as
the 38.2% retracement level of the decline from the
9.1460 June 2009 high.
The diverging technical picture between the NOK and
SEK suggests that NOKSEK is now vulnerable.
Indeed, NOKSEK has extended the major down
trend, breaking lower through the bottom end of the
long term trading range in the 1.1645 area to test the
initial channel support at the 1.1495 level. The initial
rebound from here has been limited by the key
resistance at 1.1660 and down trendline resistance at
1.1685. Failure to overcome this resistance will keep
the down trend intact. Indeed, medium term technical
indicators are giving bearish signals. Hence, we
expect a decline below the recent 1.1645 lows
opening downside potential towards the major
channel support at 1.1315 and then long term
support at 1.1195.
EURUSD has
extended the recent
recovery rally to test
channel resistance in
the 1.3445 area.
From here a near-term
correction lower is
likely targeting the
1.32 and 1.3155 area.
The ability to hold
above 1.3155 will
keep the outlook
bullish allowing a
move to 1.3690.
Chart 1: EUR/USD – near-term correction lower
1.46 1.4580
1.41
1.3820
1.3690
1.36
1.3280
1.3400
1.3445
1.31
1.3275
1.26
1.2920
1.21
1.2180
1.16
1.1880
01-Feb-10 31-Mar-10 28-May-10 27-Jul-10 23-Sep-10
Source: BNP Paribas
Ian Stannard 23 September 2010
Market Mover, Non-Objective Research Section
48
www.GlobalMarkets.bnpparibas.com