The USD/NOK pair rose during the course of the day on Wednesday, breaking the top of the shooting star from the Tuesday session, and going above the 6.20000 level. Because of this, the market should continue to go higher as the trend line certainly has been holding onto the uptrend. This market is highly sensitive to the oil markets, as Norway is a major exporter of petroleum. As the value of the US dollar rises in general, this will bring down the value of oil, and therefore bring down the value of the Norwegian krone.
In fact, I like this pair as a proxy for trading crude oil, because it is a more pure were play than the USD/CAD pair is anymore. After all, the Americans are starting to produce more of their own petroleum, and as a result they buy less from the Canadians. However, in this pair you are essentially looking at the value of the Norwegian krone in the oil markets. This is because futures markets are based in US dollars. In other words, this has nothing to do with the value of oil been exported to America, rather the value of oil been sold in the open market. This is an inverse of the futures market, and as you can see we certainly have a nice clean trend.
Wider spreads, smaller pips value.
This does have a wider spread then you may be used to as far as Forex pairs are concerned. However, the reality is that the pip value is much smaller as well. Because of this, you have to get used to the idea of 500 pips swings as the norm. It doesn’t matter though, because at the end of the day it is all the same, as the size of the contracts of course can be manipulated to have the same risk parameters as any other Forex pair. With that, there’s no reason whatsoever that you should avoid this market if you have the ability to trade it. Currently, it appears that we are heading to the 6.30000 level.
