USD/NOK Forecast: Norwegian Krone Forms a Wicked Hammer

Keep in mind that this is not a pair that you trade for short-term gains and losses.

The US dollar plunged quite substantially against the Norwegian krone during the session on Thursday, only to turn around and end up with a slightly negative clothes. Quite frankly, this has the looks of a liquidity event, and therefore I would not read too much into it. The fact that we closed right at the 50 day EMA does suggest that there support here, and therefore I think that you should be looking for buying opportunities.

That being said, the Norwegian krone is a petrocurrency, and therefore you have to have a look at the crude oil market at the same time. If we can break above the top of the candlestick for the day on Thursday, then it will probably mean that oil is falling. On the other hand, if oil continues to take off, we may see this pair drop towards the 200 day EMA at 8.7, and then maybe even down to 8.5 after that.

Keep in mind that this is not a pair that you trade for short-term gains and losses. You are essentially investing in oil when you take this trade, and where it is going to be three months from now. Norway is a very small country, so it is not as if the currency is traded for anything other than crude oil most of the time, unless of course the central bank itself does something drastic. Because of this, you have to keep in mind what is going on in oil and then pay attention to entries in this market. You have to keep your position size rather humble, because your stop loss placement is going to have to be a rather large this time a year. That being said, if you think of it more as an investment and less as a trade, you should do okay with this and come out ahead.

If we were to somehow break down below the bottom of the candlestick for the trading session on Thursday, that would be the bottom falling out of this market and at that point I am not even sure where we end up, maybe somewhere near the 8.2 level based upon the most recent bounce from that area? Regardless, the candlestick that we see for the session on Thursday have to be somewhat ignored, because that move almost certainly had to do with the time of year.

USD/NOK

Christopher Lewis

Christopher Lewis has been trading Forex for several years. He writes about Forex for many online publications, including his own site, aptly named The Trader Guy.