Currencies: Spotlight on scandies

For once, let's talk a little about these northern European currencies, often referred as "scandies" by currency traders. Why? Because they are among the most heavily traded currencies in the world, and also because they have a story to tell.

Scandies include Norwegian (NOK), Swedish (SEK) and Danish (DKK) currencies. The first two are the most interesting to look at, as they are floating, while the latter is pegged to the euro. Historically, the NOK was correlated to the price of oil, but as Norway's sovereign wealth fund invests oil revenues around the world, this correlation is much weaker today. On the other hand, the SEK is often considered a proxy for risk appetite, although here again, there are many recent counter-examples.

Source : Bloomberg

The USDSEK is attempting to bounce off the lower boundary of a descending channel, support around 9.92, while counter-cyclical indicators such as the RSI are in a similar configuration. In the best of all possible worlds, the pair could head for the top of its channel at 11.02.

Within the Nordic galaxy, the NOKSEK is often used to refine one's choice. As it happens, its chart structure is also worth keeping an eye on.

Source: Bloomberg

In weekly data, the bullish candle on support at 0.95 caught sellers off-guard and kick-started a potential recovery to 1.05. This anticipation is supported by the stochastic indicator, which has just given a buy signal from its oversold zone above its signal line. By way of comparison, the arrows show previous recent occurrences.