NOK on wood

Wondering why EUR is holding up so well against major currencies? Keen to trade oil, but put off by higher volatility? EUR/NOK offers exposure to both themes in a single trade.

Wondering why EUR is holding up so well against major currencies? Keen to trade oil, but put off by higher volatility? EUR/NOK offers exposure to both themes in a single trade.

Oil production is 15% of Norway’s GDP, and around 40% of exports. Naturally, the NOK is highly sensitive to oil price moves, and the recent stabilisation of crude is one of the contributors to recent NOK strength (EUR/NOK weakness).

The next week is jammed with Euro data releases, including GDPs, inflation numbers, PMIs and retail sales. Add in concerns around banking system, and any one of these releases could be a catalyst for EUR weakness.

Which brings us to the chart. A clear breach of support around 9.1500 is extending downward. This may be the start of a significant move in EUR/NOK, and a test of support at 8.3000 can’t be ruled out. However, there are a number of potential supports on the way. That’s why I’m happy to sell at current prices, using a Parabolic stop-and-reverse trailing stop loss order (the green dots). The parabolic SAR will track down with the market – as it did December 2015. Any significant reversal will eventually touch the SAR, giving the signal to stop loss / take profit.