NOK/SEK flows: Pullback to 0.98~ if oil correction continues to stick?
Oil pullback proving sticky for now, as talks neither delivering nor breaking down yet
Could see NOK/SEK overbought run and pullback extend towards 0.98 if it holds
With oil remaining off the highs - the market still betting (or at least hedging), some kind of deal will emerge as talks continue for all the political tensions and risks on show the last 48 hours – in the immediate term this does ask some questions of some of the more loaded trades, especially on the crosses. The RBNZ gave a good excuse to pull back on the more stretched moves on the NZD the last few sessions, and is on the negative ToT side of popular cross trade, but NOK is another market that is heavily loaded on positioning on the long side.
NOK/SEK has been an ‘easy’ long trade off cheap levels with the geopolitical driven oil rally, and we are seeing some signs of some trimming and profit-taking on the cross today as the oil correction is largely proving sticky for now.
On the charts, it was already overbought and well primed for a pullback. Taking out the 20dma and the 1~ level has given some extra short-term momentum. 0.986/00, 38.2% and 29 Apr low could end up attracting on the profit-taking move if we avoid any decisive negative Iran news as the talks drag on and Brent remains down at current tempered levels.