EUR/NOK potential leg higher near term – Danske Bank

Senior Analyst at Danske Bank Kristoffer Lomholt sees the likeliness that the pair could edge higher in the near term.

Key Quotes

“During the summer we argued that the downside potential for EUR/NOK was increasingly limited on the back of positioning and the oil price reaching the high end of its trading range. In addition, over the last months two factors have now also made relative rates a less likely factor to send EUR/NOK lower. First, it has become less likely that Norges Bank will send a hawkish signal to markets in September. Secondly, the postponement of the US debt ceiling issue means Nibor fixings are less likely to weigh on EUR/NOK in Q4 this year”.

“We maintain EUR/NOK is a near-term range play but the risk of a correction higher has increased. We raise our 1M and 3M forecasts to 9.40 (from 9.30) and 9.50 (9.30), respectively. The higher 3M forecast primarily reflects the usual December seasonality supporting the cross. We leave our 6M and 12M forecasts unchanged”.