The USD/NOK pair initially shot higher during the session after a short-term pullback, but Wednesday ended up printing a relatively bearish reversal signal. The reason I say this is that the candlestick is essentially a shooting star, and it is at the 7.75 level, an area that has been both supportive and resistive in the past. This of course has caught my attention, as it is a large, round, psychologically significant number.
On top of that, you see that I have a longer-term trend line on the chart, and of course we have broken below it. Because of this, and signs of resistance, I think that if we can break down below the bottom of the range for the Wednesday session, we could start to see this market sell off again. Remember, the Norwegian krone is a little bit different than other currencies as the spread is pretty wide, but the PIP value is miniscule. In other words, don’t get freaked out about the bid/ask price.
Petroleum
Remember, the oil markets have a massive influence on the Norwegian krone, so we will have to wait to see what happens. I believe that the two will move in tandem, as it seems that the crude oil markets that I follow, the Light Sweet Crude and the Brent, both are testing levels of support at the moment. If the oil markets bounce, and then there should be more demand for the Norwegian krone, as there are so many Norwegian rigs in the North Sea.
If we do get a break down below the bottom of the range for Wednesday, I think that we would then head towards the 7.58 level. It will probably go lower than that given enough time, but I have to wonder whether or not this is essentially a trend change that has happened? It certainly smells like one. There is the possibility of course we break higher, and if we break the top of this candle, then I believe we are probably looking at 80.00 over the next couple of weeks. Pay attention to oil, and trade accordingly.
