Story
Citi Takes Profit on NOK/SEK Trade as Pair Nears Key Technical Level
Summary
Citi has closed its Norwegian krone vs. Swedish krona position to lock in profits as the pair approaches a major long-term resistance level. The bank maintains that the trade thesis, linked to energy markets and geopolitical risk, remains valid.
Citigroup is taking profit on its long Norwegian krone (NOK) versus Swedish krona (SEK) position after recent gains brought the currency pair near a significant technical resistance level, according to a note from the bank.
Profit-Taking at Key Resistance
The decision to close the position comes as the NOK/SEK cross approaches 1.0519, a level that coincides with both the firm's upper strike price and the 200-month moving average. Citi analysts described this long-term moving average as a "historically pivotal level," making the current juncture a logical point to realize gains.
Underlying Thesis Remains Intact
Despite banking the profits, Citi suggested the fundamental drivers for a stronger NOK relative to the SEK could persist. The bank noted that the trade can "continue to work" as a vehicle for expressing views on market conditions.
AdThe firm had originally established the position as a way to trade on energy market movements and as a "clean expression of re-escalation risk." According to the note, the trade has performed as expected by tracking these dynamics.
Central Bank Action a Minor Factor
Citi also noted a recent policy shift by Norges Bank, Norway's central bank, which has moved from buying to selling its domestic currency. However, the firm emphasized this was not a central factor in its decision, describing the amounts being sold by the central bank as "modest."
Read next
More on Forex
Canadian Dollar Slips to One-Month Low as Hawkish Fed Fuels U.S. Dollar
The Canadian dollar weakened to its lowest level in a month against the U.S. dollar after the Federal Reserve raised interest rates and indicated another hike is likely this year, widening the policy divergence with the Bank of Canada.
UBS Forecasts EUR/CHF to Retest 0.96 as Swiss Franc Lags on Low Yield
Analysts at UBS project the euro could strengthen to 0.96 against the Swiss franc, citing the franc's low yield and the Swiss National Bank's expected dovish stance compared to other G10 central banks.
Pound Sterling Rally May Fade on UK Fiscal Concerns, Citi Says
Analysts at Citi suggest any near-term strength in the British pound following the Bank of England's meeting is unlikely to last, citing significant fiscal risks associated with the upcoming October budget.
Pound Sterling Declines as Fed Rate Hike Looms and UK Inflation Data Tempers BoE Bets
The British pound fell against the U.S. dollar on Wednesday as markets braced for an almost certain Federal Reserve interest rate increase. Domestically, a rise in UK headline inflation failed to sway expectations for a more aggressive Bank of England, adding to the currency's weakness.