Nordic Foreign money Outlook:
- A hawkish flip by the Federal Reserve has merchants promoting a trio of less-watched European currencies versus the US Dollar: USD/CHF, USD/NOK, and USD/SEK.
- Each USD/CHF and USD/SEK charges seem poised for many upside within the near-term, whereas surging vitality costs could also be providing a unique route for USD/NOK.
- Based on the IG Client Sentiment Index, USD/CHF has a blended bias.
Non-Main USD-crosses Turning Bullish
The US Greenback has been gathering tempo over the previous a number of days as US Treasury yields ratchet increased following the September Fed assembly. With the Federal Reserve poised to start its stimulus slowdown over the approaching months, the US Greenback has been appearing in a way much like worth motion in 2014, when the taper tantrum rattled markets.
Like in 2014, elevated US Treasury yields helped carry the US Greenback versus most of its European forex counterparts. Brief-term technical readings recommend that extra beneficial properties could also be in retailer for USD/CHF and USD/SEK charges, though USD/NOK charges might not climb in any respect if the surge in vitality costs continues within the near-term.
USD/NOK RATE TECHNICAL ANALYSIS: WEEKLY CHART (June 2020 to September 2021) (CHART 1)
USD/NOK charges stay within the broader confines of the descending channel in place for the previous yr, having simply briefly touched a contemporary month-to-month low earlier immediately as oil costs proceed to surge.
Bearish momentum has been gathering tempo in USD/NOK. The pair is absolutely beneath its every day 5-, 8-, 13-, and 21-EMA envelope, which is in bearish sequential order. Day by day MACD is now declining beneath its sign line, whereas every day Gradual Stochastics have began to drop into oversold territory.
By transferring beneath the prior September low at 8.5615, USD/NOK charges me be predisposed to additional weak spot in direction of the 23.6% Fibonacci retracement of the 52-week excessive/low vary at 8.4954.
USD/SEK RATE TECHNICAL ANALYSIS: WEEKLY CHART (March 2020 to September 2021) (CHART 2)
USD/SEK charges are beginning to flip increased, partially due to the rising divergence within the near-term path between the Sveriges Riksbank and the Federal Reserve. In breaking above the 23.6% Fibonacci retracement of the 2020 excessive/2021 low vary at 8.6776, USD/SEK charges could also be poised to rally to and thru their September excessive at 8.7462.
Bullish momentum is gathering tempo, now absolutely above its every day EMA envelope (which isn’t in bullish sequential order simply but). Day by day MACD has issued a bullish crossover by means of its sign line, whereas every day Gradual Stochastics have began to show increased whereas above their median line.
USD/CHF RATE TECHNICAL ANALYSIS: DAILY CHART (September 2020 to September 2021) (CHART 3)
USD/CHF charges are gathering bullish momentum after being rejected by a trifecta of Fibonacci retracements earlier within the month between 0.9304 and 0.9329: the 38.2% retracement of the 2019 excessive/2021 low vary; the 50% retracement of the 2020 excessive/2021 low vary; and the 23.6% retracement of the 2021 low/excessive vary.
USD/CHF charges are above their every day EMA envelope, which is in bullish sequential order. Day by day MACD continues to level increased whereas above its sign line, and every day Gradual Stochastics’ descent from overbought territory seems to be ending. One other run in direction of the month-to-month excessive at 0.9333 might materialize within the coming days.
IG Consumer Sentiment Index: USD/CHF Fee Forecast (September 27, 2021) (Chart 4)
USD/CHF: Retail dealer knowledge reveals 69.60% of merchants are net-long with the ratio of merchants lengthy to quick at 2.29 to 1. The variety of merchants net-long is 1.52% increased than yesterday and 47.55% increased from final week, whereas the variety of merchants net-short is 15.35% increased than yesterday and 38.98% decrease from final week.
We sometimes take a contrarian view to crowd sentiment, and the very fact merchants are net-long suggests USD/CHF costs might proceed to fall.
Positioning is much less net-long than yesterday however extra net-long from final week. The mix of present sentiment and up to date modifications offers us an extra blended USD/CHF buying and selling bias.
— Written by Christopher Vecchio, CFA, Senior Foreign money Strategist