By: DailyForex.com
The Norwegian krone is normally thought of as a proxy for the crude oil market. More specifically, I find that it correlates nicely with the Brent market, as Brent North Sea is the grade that most often is found when drilling in the North Sea itself. Many of those oil rigs that you see are Norwegian in origin, so that of course means of the Norwegian krone either benefits or suffers as a result.
Right now, the oil markets simply cannot get out of their own way, and the Brent market looks as if it is ready to fall to the $40 a barrel level. If that’s the case, I cannot imagine a reason to own the Norwegian krone, as interest rates are nowhere near being raised in Oslo. Because of this, I think that we have a longer-term trend that should continue to pay dividends if you are patient enough.
That Being Said…
I believe that being said, the market is a bit overextended at this point. With this, you have to think of this pair as more or less an investment at the moment, as the US dollar continues to be the favored currency around the world. The fact that we keep forming hammers at the absolute top is a good sign that the buyers will eventually win out, and as a result I don’t see any reason to sell. In fact, I think there is a massive amount of support all the way down to the 8.50 handle, and as a result I think pullbacks simply represent value in the most desirable currency in the world right now.
While I don’t necessarily know what the longer-term target is yet, I do believe that it’s very likely we will reach towards the 9.00 level over the next several months. With this, I believe that longer-term traders will continue to and are this market and punish the Norwegian krone as long as well remains so soft.
