CORE POSITION TRADE
TRADE REFERENCE CP31:
DATE: 11th May 2022
PROJECTED TRADE PERIOD: 2022 - 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).
AS the ECB plans lift off out of its accommodative cycle, EUR strength will play into this pair short via NOK strength with the USD sitting in the middle as EUR strength should also move the EUR/USD higher away from the recent support of 1.0500.
All three currencies interact into how I believe the USD/NOK will play out throughout the remainder of 2022 and into 2023.
As we know the USD and NOK Central Banks are both HAWKISH, with the FED dominating moves in this pair, primarily due to the pair being somewhat illiquid vis-à-vis other pairs. It is EUR strength and its geographical proximity to Norway that will influence this pair. In normal trading conditions it does usually operate as an inverse currency to the EUR/USD. Hence my attraction to this set up medium to long-term.
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.
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.
From the chart above the triangle break higher was always going to bring an opportunity to short. It was just a question of when NOT if.
I am using areas of confluence and spikes higher and lower as areas of entry.
Longer-term, I do expect to see a much stronger NOK currency and my GLOBAL LIMIT is currently position at a March 2022 spike low of 8.5700
EXISTING LIVE and LIMIT ORDERS: