Charts flashing pullback risk for the Viking cross
Oct 8 (Reuters) -The NOK/SEK cross may have put in a top at 0.9758, Monday's high point, and the daily chart is indicating downside risk following a cloud breach failure.
Long upper candlestick shadows combined with a false Ichimoku cloud break suggest the demand side of the cross has weakened and that a corrective pullback could take hold.
Norway's crown has held a short-term advantage over the SEK, underpinned by the Norges Bank's go it alone stance on interest rates and higher oil prices, but there may be scope for NOK/SEK to pull back from a seven-day rally.
Volatility has been a feature of the Viking cross since it peaked at 1.0125 back in May and big swings, on balance, have favoured the SEK.
The Swedish crown has performed well despite diverging central bank policy. However, flash Swedish CPIF inflation for September, showing a drop to 1.1% year-on-year from 1.2%, could lean the Riksbank towards a 50-basis point rate cut at the next policy meeting which could limit any pullback in NOK/SEK.
As it stands, the Norges Bank key interest rate is at 4.5% with a chance of a December 25-basis point cut while the Swedish benchmark rate is at 3.25% and could drop to 2.75% in November.
For more click on FXBUZ
NOK/SEK daily Ichimoku chart: https://tmsnrt.rs/3XVATl0
Peter Stoneham is a Reuters market analyst. The views expressed are his own, editing by Ed Osmond
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