NOK appears overbought near term – Danske Bank

Pernille Henneberg, Senior Analyst at Danske Bank, sees the Norwegian Krone in the overbought territory in the short term.

Key Quotes

“The NOK looks increasingly overbought (versus EUR, SEK and in particular versus USD) according to our short-term financial models as the model fails to explain recent NOK strength given the flattish development in the oil price”.

“This illustrates that the NOK sensitivity to the oil price has declined recently. Near term, 8.92 is the next strong support level for EUR/NOK – if broken it would in our view open up room for more short-term downside”.

“However, as the EUR/NOK oil price gap that started in December, when NOK liquidity was worsening, has now closed, we think NOK sensitivity to the oil price could gradually rise in the coming weeks. This, along with stretched short-term valuations, indicates an increased correction risk in the near term”.