CORE POSITION TRADE
TRADE REFERENCE CP32:
DATE: 23rd September 2022
PROJECTED TRADE PERIOD: Q4 2022 – H2 2023
CURRENCY PAIR: USD/NOK
TRADE DIRECTION: SHORT
THOUGHTS BEHIND THE TRADE:
This currency is closely aligned to that of the ECB, because of geographical location. It is also influenced by its neighbour Sweden (SEK).
We are in unprecedented times at the moment vis-à-vis FX market volatility and as the EUR struggles with USD overwhelming strength, this pair will weaken as a result moving the pair higher, maybe back toward the covid lockdowns levels c.12.000.
At the most this pair is driven by oil price and the FED’s policy on its determination to fight and beat inflation. Whilst the Norwegian economic fundamentals remain strong, GDP is brilliant at the moment, albeit fairly consistent. Unemployment is very low, and the country is basically well-run and as we all know it has a mighty impressive
USD$1trillion Sovereign Wealth Fund. The bottom line appears to be that the Norway overall is fundamentally in good shape.
Norway has one of the strongest economies in the world and whilst it is treated as an OIL based economy, 25% of Norway’s GDP emanates from OIL and GAS, it’s well renowned Sovereign Wealth fund (USD 11 trillion) invests billions throughout the globe and the economy’s ability to be diverse with strength is the envy of many especially with OIL as a backstop.
The bottom line for me is, Norway operates at full employment and the economy is well managed and inflation is controlled. NOK strength is always a factor to consider against a basket of other currencies.
My goal here is very straightforward with idea, execution is the key critical success factor to its success moving forward through the tear end 2022 into next year.
I will be layering in “SELL STOP” limit orders as NOK weakness continues ready to capitalize on NOK strength as the USD reversal occurs.
The big question is of course, when will this happen?
The answer is of course that I do NOT know BUT, I want to be ready. Given that the USD strength move has been relentless, when it comes off it should be powerful.
NOTE: I could be adding in “layer trades” for a while before the we actually see the move that I am projecting trigger.
SUPPORTING WEEKLY CHART:
As you can see from the chart below, the USD/NOK move higher has been confirming and my initial thoughts that the move would stop c.10.3000 or c.10.5000 have both fallen on deaf ears.
My thoughts right now is place my GLOBAL STOP above the covid (March 2020) highs at 12.2000, and layer in short trades as we move higher.