USD/NOK TECHNINICAL STRATEGY: PENDING LONG
- USD/NOK likely to continue uptrend into 2019
- Trade wars and EU turmoil weighing on NOK
- Low crude oil prices may continue to hurt OBX
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USD/NOK has been trading within a relatively consistent range since 2015, and on November 12 had a daily close just above the resistance at 8.4286 before extending to 8.5185 the following day. The pair since then has risen by 3 percent.
USD/NOK – Weekly Chart
Norway is primarily an export-driven country with the EU as its biggest client. The slower growth in the bloc has certainly weighed down on Norway’s trade balance and CPI. The political turmoil from Brexit, the Italian budget crisis and increasing political fragmentation in the region has negatively impacted European equities and given a gloomy outlook for growth in 2019.
While globally, Norway only provides 2% of crude oil, it is the third largest exporter of natural gas in the world and provides 25 percent of the EU’s gas. The industry contributes 12 percent to Norway’s GDP and constitutes 37 percent of all exports. It comes to no surprise then that the trade wars and plunging oil prices have weighed down on the Krone and Norway’s benchmark OBX equity index.
OBX Equity Index and ICE Brent Crude
As such, going long seems like an attractive proposition given that probability of a reduction in protectionism, EU political fragmentation and trade wars all seem unlikely. Not to mention the gloomy forecasts for growth in 2019 and diminishing demand for oil will likely drive risk aversion and push the demand for the dollar up while simultaneously weighing down on the Krone.
Global equities may retreat tomorrow as the Fed prepares to squeeze in a final rate hike for 2018 and provide the outlook and of trajectory monetary policy for 2019. The underestimated hawkish Fed will likely take markets by surprise and cause the US Dollar to rally amid the potential risk-aversion, pushing USD/NOK higher. If the pair has a daily a close above 8.7809, an opportunity to go long targeting the next resistance at 8.9485 may present itself.
USD/NOK – Daily Chart.
USD/NOK TRADING RESOURCES
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--- Written by Dimitri Zabelin, Jr Currency Analyst for DailyFX.com
To contact Dimitri, use the comments section below or @ZabelinDimitri on Twitter
