NOK Still Bullish; Swedbank Threatened by Latvian Mortgage Program
October 13th, 2009 Posted in Chief Analyst Special Report
Once again the Baltic States emerged as a threat to one of Sweden’s largest banks. With a program to reduce mortgage liabilities, Latvia is putting much attention on the exposure which banks like Swedbank have to the Baltic region. Swedbank has had to raise capital three times already, and even though its executives claim that it can now stand on its own, the risk it continues facing from its neighbors makes many investors worried.
Forex traders have also begun pricing this news in with a modest correction to the SEK, followed by flat range-trading behavior due to uncertainty about the Krona’s future.
In Norway, the commodity-backed currencies such as the NOK continue to make gains from bets surrounding the economic recovery. With Crude Oil rising due to market optimism, as well as traders using commodities to hedge against inflation, many currencies affected by oil have also entered strong bullish channels. On the other hand, given all the positive news priced into the commodity-linked currencies, many analysts have expressed concerns that they may be sitting atop a house of cards.
If outlook changes for the worse, or if commodities start getting sold off, these currencies may see a strong downward correction.
- The chart below is the 4-hour chart of the USD/NOK currency pair.
- The indicators used are the Bollinger Bands, MACD/OsMA, and Williams Percent Range.
- Point 1: The Bollinger Bands have begun to tighten suggesting a sharp volatile movement may be impending.
- Point 2: The string of bullish crosses and upward direction of the indicator suggest upward mobility.
- Point 3: The Williams Percent Range has left the over-sold territory but continues to move in an upward direction, suggesting similar price movements may occur.
- The bearish channel of this pair has yet to be breached, but as can be seen the price is starting to flatten out in anticipation of a large movement.
- With so much bullish pressure on this pair, it may be safe to assume a correction today, but the downward trend may not yet get breached.
Start trading with Greg Holden now:
Tags: Baltic States, DKK, EURNOK, Forex, forex blog, Forex Strategies, forex tips, Forex Trading, Kroner, Latvia, NOK, Norway, norwegian krone, Scandinavian, scandinavian currencies, SEK, Swedbank, Sweden, Swedish Krona, USD/NOK, USD/SEK
