EUR/NOK traded lower yesterday, after it hit resistance near the 9.9600 territory and continued to do so today, reaching the 9.8600 support level, marked by Wednesday’s low. On the 4-hour chart, the price structure is lower peaks and lower troughs below the short-term downside line drawn from the high of the 27th of December, but in the bigger picture, the pair is still trading above the uptrend line drawn from the low of the 17th of October. Thus, we expect the rate to continue drifting south, but up until it challenges that medium-term uptrend line.
If the bears stay in control and manage to overcome the 9.8600 barrier soon, then we would expect them to push the pair towards the 9.8050 hurdle, which proved to be a strong resistance back on the 7th of September. Another dip below that level could extend the slide towards the 9.7700 obstacle, or the aforementioned medium-term uptrend line drawn from the low of the 17th of October. This is where we will take the sidelines for a while, as the bulls may be tempted to jump back into the action and give an end to the current correction.
Looking at our short-term momentum studies, we see that the RSI turned down after it hit resistance near its equilibrium line. Now, it looks to be heading towards 30. The MACD, already negative, has turned down as well and fell below its trigger line. What’s more, both of these indicators remain below their respective downside resistance lines.
On the upside, we would like to see a decisive rebound back above 9.9600 before we start examining whether the downside correction is over, and the prevailing uptrend is back in force. Such a move could initially aim for the psychological round figure of 10.0000, the break of which may allow the bulls to touch once again the peak of the 27th of December, at around 10.0550. This is the pair’s highest point in a decade.
