Norwegian Krone not Playing Fair

With the collapse in oil prices since the beginning of the week, we have looked at a few currency pairs and what we can expected from them, including the USD/CAD and the USD/MXN. The Norwegian Krone is an additional currency to be aware of, as Norway is also a large oil exporting country and the Krone is likely to be affected by the move in oil (among other things).

Before the outbreak of the coronavirus, the Norges Bank had been increasing rates throughout late 2018 and 2019 as Norway’s economy was holding up well amid a global manufacturing slowdown. However, as the coronavirus began to spread, the Norges Bank slashed rates from 1.5% to 1.0% on March 13^th. A week later, on March 20^th, they cut an additional 75bps to 0.25% as the world came to a near standstill and liquidity dried up (just as most of the world had done).

Enter crude oil and the collapse in prices over the last month. The correlation coefficient on a weekly timeframe between West Texas Crude Oil (WTI) and USD/NOK is -0.90. This means that 90% of the time, the Norwegian Krone and WTI move together (or 90% of the time, USD/NOK and WTI trade inversely).

Source: Tradingveiw, City Index

On a daily timeframe, USD/NOK traded higher as crude oil sold of due the Russia/OPEC squabble, in which Russia refused to cut output with the rest of OPEC. As a result, there was no agreement to the production cut, and Saudi Arabia began producing a full throttle. However, as WTI began consolidating in the 20-30 US Dollar range, USD/NOK pulled back to the 61.8% Fibonacci retracement level from the March 3^rd lows to the march 19^th highs. On Monday, when the May WTI Crude oil contract traded was down over 200%, USD/NOK only moved higher 1.25%. On Tuesday, the June WTI Crude oil contract traded down 50%, USD/NOK was only up 1.81%. And today, as June contract is up 5.81%, USD/NOK is up 1.3% (in the opposite direction one would expect!)

Source: Tradingveiw, City Index

However, on a 240-minute timeframe, notice where USD/NOK is trading: right up against horizontal resistance at 10.77 and just below the 38.2% Fibonacci retracement level from the March 19^th highs to the April 7^th lows, near 10.8730. If price breaks through, there is horizonal resistance and the 50% retracement from the same period at 10.8730. Horizontal support levels are at 10.4688 and 10.2857, and then the April 7^th lows near 10.1000.

Source: Tradingveiw, City Index

Although WTI Crude Oil may have been trading a but heavy as of late, USD/NOK isn’t believing it, at least in the short-term. However, the bounce in USD/NOK appears to be corrective with good resistance above. If USD/NOK does roll back over, it will have proved correct, and the move lower in crude was just a bit overdone!

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

StoneX Financial Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit www.cityindex.com/en-sg/terms-and-policies for the complete Risk Disclosure Statement.

ALL TRADING INVOLVES RISKS. LOSSES CAN EXCEED DEPOSITS.

City Index is a trading name of StoneX Financial Pte. Ltd. (“SFP”) for the offering of dealing services in Contracts for Differences (“CFD”). SFP holds a Capital Markets Services Licence issued by the Monetary Authority of Singapore for Dealing in Exchange-Traded Derivatives Contracts, Over-the-Counter Derivatives Contracts, and Spot Foreign Exchange Contracts for the Purposes of Leveraged Foreign Exchange Trading. SFP is also both Derivatives Trading and Clearing member of the Singapore Exchange (“SGX”). SFP is a wholly-owned subsidiary of StoneX Group Inc.

The information provided herein is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to invest, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk.

The information does not represent an offer of, or solicitation for, a transaction in any investment product. Any views and opinions expressed may be changed without an update. To understand the risks and costs involved, please visit the section captioned “Important Information” and the “Risk Disclosure Statement”.

The information herein is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.

StoneX Financial Pte. Ltd. 1 Raffles Place, #18-61, One Raffles Place Tower 2, Singapore 048616. Tel: 6309 1000. Co. Reg. No.: 201130598R.

This advertisement has not been reviewed by the Monetary Authority of Singapore.