Marshall Gittler
Trading Analysis
USD/NOK
The dollar gained against almost all of its G10 counterparts and the EM currencies we track as rising geopolitical tensions created demand for the US currency.
The first Russian response to the sanctions from the West shocked the markets, increasing the worries that the crisis over Ukraine could deepen. If the nervousness in the markets remains and the geopolitical risks escalate we could see further depreciation of the Eastern European currencies like HUF, CZK and PLN.
The Norwegian krone had been falling vs USD during the European morning Thursday along with the rest of the market, but rallied to recover its opening levels after the country’s industrial production rose 5.7% mom in June, a rebound from -5.9% in May. The strong reading pushed USD/NOK down approximately 0.20%, leaving NOK as the only G10 currency that traded virtually unchanged against the greenback. Russia’s recent import restrictions apply to Norway as well, so this might affect negatively the currency somehow and push USD/NOK higher. However, I would remain neutral on USD/NOK at the moment, given that the technical picture shows signs of weakness and since there are no major indicators coming from Norway nor the US this week.
The focus is now on the press conference by ECB president Mario Draghi following the ECB Council meeting.
USD/NOK fell after finding resistance within the 6.2775/6.2840 area and also near the prior near-term uptrend line, drawn from back the lows of the 23rd of July. At the time of writing, the rate is trading marginally above the support barrier of 6.2580 (S1), which coincides with the 200-hour moving average. A clear move below that zone would confirm a forthcoming lower low and could signal the establishment of a newborn downtrend. The 14-hour RSI fell back below its 50 line, while the MACD, already negative seems ready to re-cross below its signal line, supporting the today’s negative momentum. On the daily chart, although the rate is trading above both the 50- and 200-day moving averages, I can see negative divergence between the price action and both our momentum studies, something that supports my negative view as far as the short-term outlook is concerned. It is worth noting that the last time, the rate managed to move above the 6.3010 (R3) zone, it was rejected and collapsed within the following month. The last time we had a daily close above 6.3010 (R3) was back in August 2010.
Support: 6.2580 (S1), 6.2475 (S2), 6.2370 (S3) .
Resistance: 6.2775 (R1), 6.2840 (R2), 6.3010 (R3).
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