By: DailyForex.com
The USD/NOK pair isn’t necessarily one that many of you will trade on a regular basis. However, the Norwegian krone is a liquid enough currency that successful trades can be placed using it. The first thing to understand about Norway's economy is that it is highly influenced by the price of crude oil. This is because many of those drilling rigs in the North Sea are actually Norwegian owned, and therefore the Norwegian krone is somewhat of a petro currency.
Obviously, the United States imports quite a bit of petroleum, although this is starting to change. That being said, this pair typically will follow in an inverse manner the oil markets. In other words, as the price of oil goes higher, this pair typically will drift lower. That being said, it does tend to be a pair that has a little bit higher spread than many people were used to, quite often being roughly 50 pips. On the other hand, this pip values are much lower than you are used to seeing, so in the end it essentially works
itself out.
Watch the oil markets
As I stated before, watch the oil markets to see where this pair could be going. Alternately, this pair can actually lead the oil markets as well. What I find interesting is that the Norwegian krone gained is so much against the US dollar during the session on Wednesday in an otherwise fairly quiet session. This could be showing that oil is getting ready to make a potentially strong move, or and could just be a simple technical drop.
Looking at the 5.70 handle, you can see that there is a significant amount of support. Back in December of 2012, it was also resistance, so you can see that this area certainly attracts traders. Now that we are approaching a, I am very interested to see what this pair does of the next couple of sessions as we could see a nice buying opportunity. Alternately, a daily close it is significantly below the 5.70 handle is enough to have me sell as well. This is one of the set up so we simply wait to see what the market wants to do, and then follow it.
