The Norwegian Krone tends to rise against the Euro when crude oil prices are on the upswing. Norway is a prodigious exporter, with a current account surplus averaging over 6 percent of GDP for the past 40 years. Much of this success owes to energy sales to the Eurozone.
This by itself implies a steady underlying outflow of Euros to Norway from the currency bloc. That is understandably amplified when the cost of crude oil rises on global markets. A higher price per barrel feeds capital flows out of EUR and into NOK. It is thus not surprising to see the Krone at three-year highs against the Euro as Russia’s invasion of Ukraine stokes supply disruption fears, sending oil prices sharply higher. Biting Western sanctions have hobbled Russian exports, squeezing an already tight post-pandemic market.
EUR/NOK vs. Brent crude oil, 12-month rolling correlation
Chart created with TradingView, prepared by Ilya Spivak
A full return to the pre-war ‘normal’ seems unlikely. Germany and other key Eurozone economies have loudly pledged to diversify away from Russian energy, straining the regional supply/demand balance and seemingly pulling EUR/NOK lower longer-term.
Nevertheless, the eventual end of military engagement will almost certainly bring some level of relief. This implies that a near-term easing of scarcity concerns may see oil prices bounce before structural forces reassert their dominance, locking in an overall tighter market.
For EUR/NOK, this hints that a shorter-term bounce after the guns fall silent may offer an opening to sell into the longer-term decline. Tellingly, positive RSI divergence hints that downside momentum is ebbing even as the larger trend points lower after last year’s breakdown.
A bounce from immediate support at 9.3867 eyes a former swing low now recast as resistance at 9.6624, with a break above that targeting the inflection level at 9.9004. Probing above the 10.00 figure may follow. Alternatively, breaking support seems to initially expose 9.1587.
EUR/NOK spot (weekly chart)
Chart created with TradingView, prepared by Ilya Spivak
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