Price experienced a drop of more than 400 pips thanks to Draghi’s statement suggesting EUR/USD is too strong. Despite this, we simply ended back where we started on 5th Feb, where EUR/NOK fell to 7.392. Current price is respecting the same support lines, with price looking to test 7.41 interim resistance.
Stochastic is showing bullish potential with readings above the Oversold line. However, looking at price action of EUR/USD, it seems that further bullish action for EUR/NOK may face headwinds with EUR/USD facing significant resistance currently (see chart below). A break above 1.342 for EUR/USD will open up 1.35 as resistance and subsequently 1.36, which will help EUR/NOK’s ability to push back to 7.43 resistance and potentially breaking back into the 7.43-44 100 pip trading range. Unfortunately it does seem that majority of this pair’s direction will be dictated by EUR, with the Norwegian krone posting little reaction (if not none) after the latest Manufacturing Output data showed gains of 0.3% M/M vs 0.1% previous.
EUR/USD 4 Hourly Chart
Longer-term perspective shows mostly sideways action for EUR/NOK, with 7.47 ceiling and 7.29 floor. 7.392 floor is keeping price against a tighter consolidation range between 7.29 – 7.39, while at the same time keeping 7.47 bullish target viable. Fundamentally, Norwegian Krone can be considered “overvalued” against the EUR if one uses Purchasing-Power Parity as a tool for currency valuation. A large part of this “overvaluation” is due to Danish central bank’s hiking rates back on 24th Jan which resulted in price testing the 7.392 last week. If such extreme measures are not able to break 7.392, perhaps we will not be able to find anything from Norway that could push EUR/NOK lower. Once again, longer term trends depends on EUR/USD direction which must be a pain for traders wishing to trade NOK fundamentals. Traders could be well rewarded to explore other NOK pair that has a higher beta towards NOK news instead of sticking to major NOK pairs such as USD/NOK and EUR/NOK in cases like this.
This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.