At a time when none of the G4 currencies look particularly attractive, a shortlist is emerging of the minor currencies to buy. CAD and AUD have their advocates, but this week there have been a number of publications pushing the NOK.
Early in the week the technical analysts at Citi were looking at CHF/NOK and saw a double top, negative momentum divergence and key resistance levels holding. They also pointed out that the break higher in crude oil does little harm to a long NOK position. Citi were looking for a healthy move of around 10%, down to the vicinity of 5.5400. The suggested stop, at 6.1800, is prudent, though it looks a little too close for comfort.
Barclays Capital published its Global outlook for 2011 this week. The bank’s currency strategist Paul Robinson sees EUR/USD down a little at 1.28 in Q1 2011 but predicts that the looseness of US policy and a German-led turnaround in European growth prospects will reverse the move and propel EUR/USD to 1.42 by the end of next year. Robinson is even more positive on UK prospects and GBP is one of his prime picks – he sees cable up to 1.82 by the end of 2011. Other buys are SEK and, again, NOK. Both Norway and Sweden “have current account surpluses and healthy government finances and have enjoyed strong growth over the past few quarters”. Robinson cautions that there might be some underperformance of SEK and NOK in the very short term due to market illiquidity, but sees EUR/SEK and EUR/NOK down to 8.80 and 7.80 respectively at the end of Q1 2011 and 8.60 and 7.75 at the end of the year. Quite a move, given Robinson’s EUR/USD view.
BNP Paribas is currently short of EUR/NOK, targeting 7.80. The bank sees EUR/NOK lower than Barclays, at 7.50, at the end of 2011. Some of this could be down to BNP Paribas’ view on continuing EUR weakness: the bank sees EUR/USD testing 1.20 again by the end of Q3 2011.
Back on the subject of the market’s most-traded currency pair: My favourite technical analyst, Paul Day at Market Securities, usually focuses on fixed income these days, so on the odd occasion that he expresses an FX view, it is worth paying attention. On Thursday morning Day sent out a comment on EUR/USD. He sees 1.3114 as critical: “...a break there suggests a new low for the down move to 1.2786. Furthermore, if we take out the recent lows, it looks like the uptick to 1.3438 was a wave B in an ABC correction... the wave equivalence target would be down at 1.2148, close to the weekly TD Prop Exhaust threshold at 1.2201 – our next major medium-term target.”