The USD/NOK (Dollar/Krone) has been on a relentless descent over the last twelve trading months. Since our June 10th 2010 high was established at 6.7273, prices have continued to trend as much as 22% lower. Temporarily price has moved off of the established April 2nd low of 5.2147 up to current resistance as seen on our daily chart.
The USD is currently at an impasse. The currency has gained strength over the last two weeks against many pairs including the Krone. However, the fundamentals for the currency remain unchanged. More insight will be given as the USD FOMC Meeting Minutes are set to be released on Wednesday this week. If it appears that more monetary easing and the continuation of a low interest rate policy are in the works, we can expect our trend to continue on its present direction.
Price Action
Taking price in to a 4Hr chart we can see the recent selloff of the Krone against the US Dollar. Trend traders can look to use these pullbacks as a chance to enter in to a longer term established trend (see daily chart) at a better price. If the USD/NOK fails to make a new high we can begin to look for breakouts below support. If price continues higher and breaks the 5.62880 mark, patience will be key as buyers will have temporary control of the market.
Trading Opportunity
My preference is to use entry orders to sell the USD/NOK. Entry orders should be placed below our 4Hr support line and under our previous low the near 5.5200. Stops should be placed above resistance over 5.6200. Limits can be set at a minimum of 2000 pips away giving us a clear 1:2 Risk/Reward ratio.
Alternative scenarios include price of the USD/NOK breaking our Daily resistance line. This would change our bias in the market and allow us to begin looking for buying opportunities.
Walker England contributes to the Instructor Trading Tips articles. To receive more timely notifications on his reports, email instructor@dailyfx.com to be added to the distribution list.
