Marshall Gittler
Trading Analysis
USD/NOK
The dollar traded mixed against its G10 counterparts during the European morning Friday. It was higher against JPY, EUR and CHF, in that order, while it was lower against NZD, AUD and SEK. The greenback was stable vs CAD, NOK and GBP.
The euro depreciated against the dollar after the German retail sales in September disappointed the market and dropped more-than-expected. The various data coming from the country seem to be weak and raise concerns that the German economy is losing steam. On the other hand, Eurozone’s CPI estimate rose +0.4% yoy in October from +0.3% yoy previously, while the unemployment rate for September remained unchanged. The data were in line with the forecasts thus they had limited impact on the single currency. Despite the acceleration in Eurozone’s consumer prices, the weak German data seem to have entrenched the negative sentiment towards the euro. We still expect EUR/USD to challenge once again the key line of 1.2500 in the near future.
The Norwegian krone was resilient even though data showed that the official unemployment rate remained at 2.7% in October. The figure was slightly above the forecast of a decline to 2.6%. The weak labor data, are in line with the rise in the AKU unemployment rate released earlier this week and the drop in retail sales for September. The worse-than-expected data together with the recent fall in oil prices could weigh on the Norwegian economy and weaken the NOK.
On Wednesday, USD/NOK reached and violated our resistance (turned into support) barrier of 6.6800 (S1), the high of the 16th of October, and on Thursday it found resistance near the high of the 8th of June 2010 at 6.7300 (R1), as expected. Today, the rate moved in a consolidative manner below that barrier, but as long as the price remains above the black uptrend line and above both the 50- and the 200-period moving averages, I would see a positive near-term picture. A clear move above the resistance area of 6.7300 (R1) could set the stage for another up leg, probably towards the 6.8100 (R2) zone, determined by the high of the 28th of April 2009. However, bearing in mind our momentum signs, I would be cautious of a possible pullback before buyers take the reins again. The RSI exited its overbought territory, while the MACD has topped and looks willing to move below its signal line. As for the broader trend, the rate is printing higher highs and higher lows above the light blue longer-term uptrend line (taken from back at the low of the 8th of May). Thus, I would consider the overall path to remain to the upside.
Support: 6.6800 (S1), 6.6400 (S2), 6.5700 (S3)
Resistance: 6.7300 (R1), 6.8100 (R2), 7.000 (R3)
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