RBC: Trade Of The Week Long NOK/SEK

RBC write “our commodity team see two channels for the weekend news pushing oil higher. The obvious one is the concern that Iran gets pulled into the conflict. But this also derails the major diplomatic reset between the U.S. & Saudi Arabia which last week looked on the brink of imminent agreement and a potential increase in energy production.”

• “NOK/SEK has had a sizeable pullback (-4% since mid-Sept) driven by the start of the Riksbank’s FX sales.”
• “Sometime in the week ahead, the Riksbank will publish the amount of foreign currency sold in the first week of intervention.”
• “We know the full size of the programme is USD8bn+EUR2bn and that it is due to take 4-6 months which would imply weekly buying of SEK4-6bn.”
• “Anything at the upper end or above that pace could be taken negatively for SEK.”
• “We use this opportunity to go long NOK/SEK targeting a break of the downtrend with a stop just below last week’s lows.”
• They recommended entering the position at SEK1.0078, targeting a move to SEK1.0305, with a stop set at SEK0.9989.