The Norwegian krone is starting to exert its will against the US dollar. As you can see on the attached chart, there was a clear and fairly obvious uptrend line that the market had been following for some time. We have now clearly broken below that, and now are testing significant support in the form of the 7.50000 level. The market sees quite a bit of support and clustering all the way down to the 7.35000 level, and while that seems like a massive area to cover, in this particular currency pair it really isn’t.
The spread is large, typically about 50 pips, but the PIP value is much smaller. Because of this, a lot of traders shy away but they don’t understand that it’s really no different than trading any other currency. On top of that, the Norwegian krone is highly leveraged to the petroleum markets, as Norway owns many of the oil rigs in the North Sea. It makes perfect sense that the Norwegian krone would go higher in value, driving this pair lower, as well markets rise.
Watch the oil markets, they are leading indicators
The various oil markets are all telling us the same thing: higher oil prices. This is especially true in the Brent market which is much more likely to affect the Norwegian krone than the sweet Crude market. Nonetheless, either one can move the value of the krone as they tend to move in the same direction anyway.
I believe that this pair is eventually going to break down significantly, and I think longer-term traders will probably be aiming for something along the lines of 6.80000 given enough time. I think that it’s very difficult to imagine hanging onto a trade like that for a lot of traders out there. However, as you trade Forex over the years, you will learn that the best and easiest way to make money is to simply hang onto the winners. The swap does favor Norway over the United States, so you also have that working in your favor. We have had a major trend line break, and those don’t come around all the time. I am very bearish of this pair over the longer term.
