The US dollar / Norwegian
Krone pair has just broken through a significant support level, which just
might be the harbinger of a stronger Norwegian currency. It had been weaker
than normal, which came as a pleasant surprise to Norwegian manufacturing and
tourist interests, as the currency has traditionally been very strong indeed.
This is a consequence of Norway ’s
oil reserves and the hangover from the Global Financial Crisis on the rest of
the global economy.
The recent weakness has been
hard for economists to explain. One theory is that, when the new Conservative
government presented its first budget in November of last year, comments made
by the Prime Minister, Erna Solberg, were interpreted as meaning that the new
government intended to weaken the currency and the market reacted accordingly.
There is now a feeling that Ms. Solberg’s comments might have been
misinterpreted.
The pair oscillated since the
weakening that took place after the comments were made and during the last
week of January 2014 there was something of an exhaustion surge, after which
the pair started to decline. It has been doing so ever since. Now, as
mentioned, it has breached the support level that was established during the
oscillation phase, at 6.06206 to the US dollar.
We have opened a short
position in USDNOK on the basis of the above. So far it is behaving as we
expected it would.
US dollar weakness
All currency pairs containing
the US dollar are awaiting US dollar strength, or rather the traders who take
an interest in these pairs are, in order to continue about their business. Typical
of this situation are the two precious metals, silver and gold. The charts
above show the silver spot market contract (XAGUSD), which has made a triple
top on the hourly chart, and the gold spot market contract (XAUUSD), which
could be about to make a lower low to add to its recent lower high.
Both of these Technical
Analysis signals are bearish. The big question is whether or not the market
will get completion on them. It all depends on whether or not the greenback
recovers its mojo in the near future. One catalyst for this could be the
minutes of the last FOMC meeting, which are due for release later today.
Comments from the committee members that would serve to allay the fears
surrounding the US economy that have surfaced since the start of the year might
be just what are required.
Minutes of the Bank of
England Monetary Policy Committee (MPC) are also due today, but may not have
the same impact as those of its counterpart in the USA .
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