TD Securities Recommend Long NOK/SEK

TD Securities have added a long NOK/SEK trade idea to their model portfolio, entering at SEK0.9940 and targeting a move SEK1.0450 - near the 200DMA - with a stop set at SEK0.9670.

• They note that “one of the key drivers of the view is that NOK/SEK is trading at a huge discount relative to our dashboard of indicators. Our short-term fair value framework implies a quick move to around SEK1.02, while our medium-term tool implies a 6.5% discount. We split the difference between the models, targeting a move back near the 200DMA.”
• “At the same time, these discounts also dovetail with a heightened awareness of policymakers, which referenced the negative impacts of a weak NOK on the policy outlook. In other words, policymakers are a bit worried about the weakness in NOK, highlighting a potential pivot point for the currency and upside risks to the Norges Bank’s rate outlook.”
• “We also note that given the risks around housing and sensitivities to higher rates, a stronger NOK could help offset inflation risks. For its part, NOK is among the cheapest currencies we track on our dashboard.”