Norway may Intervene and Buy Krone
Joe Perry March 19, 2020 4:12 PM
Today, the Norges Bank said it would consider intervening and buying the Krone.
Two of the largest moves we have seen over the past 2 weeks have been the strong bid in the US Dollar and the dramatic fall in the price of crude oil. So, what happens to a country ‘s currency (vs the USD) that relies on oil and gas for 40% of its export revenue and 20% of its GDP? It falls 30% in less than 2 weeks!
On March 9th, the day after Saudi Arabia said it would counter Russia’s refusal to cut supply by pumping its own oil as much as possible, the Norwegian Krone stood near 9.2500. Today, less than 2 weeks later, the pair reached a high of 12.1224. Nearly halfway through the move, the Norges Bank held an emergency meeting and cut interest rates from 1.5% to 1.0%. However, this action failed to halt the move higher and it continued this week. Today, the Norges Bank said it would consider intervening in the market and buying the Krone to slow the devaluation. The Norges Bank has not intervened in the market since 1999. The Central Bank also said they would offer loans for up to 12 months to help those affected by the coronavirus. As a result, after putting in today’s highs, USD/NOK retraced on the day and ended up putting in a LARGE shooting star candlestick formation. A shooting star is a one candle formation indicating a possible reversal. Resistance isn’t until today’s highs near 12.1225 and first support isn’t until yesterday’s lows near 10.5000.
Source: Tradingview, FOREX.com
USD/NOK isn’t the only Norwegian Krone pair to reverse today. The result of the Norges Bank comments also had a reversal effect on the EUR/NOK after a 20% run up during the same timeframe. Resistance again is at today’s highs near 13.1492. Horizontal support is near 11.5980, then yesterday’s lows at 11.5072. The pair also put in a huge shooting star formation.
Source: Tradingview, FOREX.com
Note that towards the end of the Crude Oil Futures trading session, US President Trump hinted that the US may intervene and buy oil for the Strategic Petroleum Reserve (SPR). This helped Crude Oil’s rally of 25% today, however most of the move was during the US session, and well after the Norges Bank comments. But this did help reinforce a lower USD/NOK.
Source: Tradingview, NYMEX, FOREX.com
When it comes to trading the Norwegian Krone, there are at least 3 factors we need to pay close attention to:
- The direction and the magnitude of the price of the US Dollar
- The direction and the magnitude of the price of Crude Oil
- Comments from Norges Bank officials
These are all currently driving the price of USD/NOK and EUR/NOK. A change in any one of them could result in a change in direction of the Norwegian Krone.
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.