NOK/SEK Move Lower On Bad News

• A light economic calendar during the European trading hours kept the major currencies in a tight range. The DXY index was virtually unchanged at midday from its early European levels. Gold and silver on the other hand continued plunging mainly due to the easing of concerns over Syria.

• SEK and NOK were the biggest movers in the G10 currencies. SEK declined after the final Q2 GDP figures were revised down to -0.2% qoq from the initial estimate of -0.1%. NOK weakened after the Norges Bank Network Enterprise Report showed output growth “slowed slightly” since the previous survey in May. While this has raised the prospect of Norges Bank downgrading its growth forecast at next week’s meeting, I still believe that they are likely to opt for a shift in tone towards a tighter policy bias.

• NOK/SEK moved lower around midday in Europe after finding resistance at the 1.1106 (R1) level. In the early afternoon the pair is testing the 1.1066 (S1) support, which coincides with the 20-period moving average. If sellers manage to push the rate below that level towards the lower Bollinger band, I expect them to increase their momentum and extend their move towards the psychological support of 1.1000 (S2). In addition, the price has moved far away from the blue trend line and a downward correction seems likely. Also, negative divergence is observed between both oscillators and the price action, which would also favor a correction.

• Support: Support is found at 1.1066 (S1), followed by the psychological level of 1.1000 (S2) and 1.0919 (S3).

• Resistance: The only resistance identified on the 1-hour chart is at 1.1106 (R1), followed by 1.1134 (R2) and 1.1160 (R3). The latter two are found from the four-hour chart.
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