EUR/NOK and EUR/SEK still a ‘sell on rallies’ – Danske Bank

Senior Analyst at Danske Bank Morten Helt has recommended fading occasional bullish attempts in both crosses for the time being.

Key Quotes

“Yesterday also saw the oil price tumbling in the late afternoon session, which among other things was a reaction to the USD spiking higher”.

“Meanwhile, the reaction in EUR/NOK was rather muted, highlighting how the NOK sensitivity to the oil price has been declining steadily over the past months. This is likely to be a reflection of the downside risk to oil markets having diminished, thereby lowering the oil price risk premium embedded into the NOK”.

“Also, costs of Norwegian oil projects have been lowered substantially over the past year making the growth outlook less vulnerable to oil price moves in the current trading range”.

“Finally, the revival of the SEK on the back of data turning (see tweet) and a slightly hawkish Riksbank message in December has in our view driven a reversal in the long NOK/SEK builds from Q3, limiting the OPEC oil impact on the NOK”.

“Going forward, we see both EUR/NOK and EUR/SEK as a ‘sell on rallies’.