From the desk of Steven Strazza @Sstrazza and Ian Culley @IanCulley
Whatever we’re looking for, the market has it.
If we’re searching for large topping patterns and strong downtrends, there’s plenty to go around, especially in the bond and stock markets right now.
Some people love taking the short side, feeding on the doom and gloom narratives accompanying the selling pressure.
But if that’s not your cup of tea, plenty of markets are trending higher. If you’re more interested in assets making new highs and like buying high and selling higher, look no further than the currency market.
When it comes to forex crosses these days, it’s simple.
All we have to do is put the US dollar in the numerator or place the Japanese yen in the denominator, and we get big bases that have either broken out or are on the verge of breaking out.
It’s that easy.
We’ve highlighted the yen in recent posts, so today we’ll switch gears and focus on a couple USD crosses from northern Europe.
Let’s dive in!
Here’s the US dollar/Swedish krona cross:
The USD/SEK cross is carving out a multi-year base below its 2020 highs near 10.50, making a series of higher highs and higher lows over the trailing six months.
As volatility in the currency market runs high and the US dollar strengthens across the board, we think the USD/SEK could take out the 10.50 level sooner rather than later.
If and when it does, we want to buy on strength, targeting approximately 11.97.
Here’s another rounding bottom formation taking place just around the corner. This is the US dollar/Norwegian krone cross:
Unlike the USD/SEK, the USD/NOK cross has a way to go before reaching its former 2020 highs. However, it’s building a similar basing pattern as it recently reclaimed a key retracement level around 9.68.
As long as it’s above that level, we like it long with a target around 10.63.
An entry at the current price is challenging given its distance from our risk level. But we can buy weakness back toward 9.68.
To be clear, we can only be long above that key retracement level.
There we have it – a couple charts for those who prefer the brighter side of the market.
If these charts are resolving higher, King Dollar is most likely dominating as risk assets continue to experience selling pressure.
That’s OK. We’ll continue to sell what’s sliding lower and buy what’s catching higher.
Thanks for reading.
As always, let us know what you think.
And be sure to download this week’s Currency Report!