Christen Tuxen, Chief Analyst at Danske Bank, recommended selling the cross on occasional bouts of strength.
“In a generally thin data calendar, many FX crosses are susceptible to movements in global factors. This is the case for the NOK, which has weakened against the EUR over the past two sessions, partly as the oil price has also been hit by the current risk environment in our view”.
“Furthermore, the EUR/USD has rebounded partially as the markets have priced in a slightly lower risk of a Le-Pen or Mélenchon win”.
“With neutral speculative NOK positioning (according to our estimation), it highlights an important point: namely that EUR/NOK could be caught in a rough business cycle/election cocktail in the coming week if the EUR rises more than expected on a convincing Macron win and oil falls on weaker global demand”.
“Thus, we think that external factors will remain in the driver’s seat near term amid a thin Norwegian data calendar. This said, and as highlighted over the past few days, we have seen a gap forming as the NOK has not moved higher amid the reversal in relative rates and the oil price”.
“Keeping in mind the much improved domestic story, our preference is therefore still to sell EUR/NOK on rallies from a tactical and not least strategic perspective. Key resistance levels are 9.2470-9.2550 (Trump Nov and March sell-off tops)”.