It is possible that we have an opportunity to buy this pair, but as far as breaking out is concerned I think we are probably thinking something along the lines of next year.
The US dollar fell rather hard against the Norwegian krone on Tuesday as we are approaching the 8.93 handle. The market is highly sensitive to crude oil, so it will be interesting to see how this plays out, but oil did have a nice session during the day, so it does make sense that the US dollar suffered against the krone. Ultimately, this is a market that will continue to be somewhat noisy, but keep in mind that this pair is an exotic pair, so it does tend to move in a rather choppy behavior and pattern.
If we break down below the 8.93 handle, it is very likely we could go looking toward support near the 8.86 level, where the 50 day EMA is rapidly tracking. That being said, you will need to pay close attention to what crude oil is doing, because unfortunately for Norwegians, most currency traders trade their currency based solely upon oil. Yes, sometimes the Riksbank can cause some noise with inflation and interest rates, etc., but at the end of the day it is small enough currency that crude oil traders throw around.
When I look at this chart, you can make a serious argument for a massive bullish flag, so it is really not until we break down below the 50 day EMA that I think the uptrend is dead. If we did break down below there, it is likely we will go looking towards the 8.55 handle over the longer term. I suspect that any sell off that we get from this point, I will be looking for some type of rally that I can take advantage of and start buying as the US dollar is by far the most favored currency out of the G 10 right now. That being said, liquidity is going to be an issue and in this pair that could be a serious issue. We are heading towards the end of the year so most traders will be focused on the holidays and not so much on placing big trades.
Crude oil does look like it is approaching a significant amount of resistance, so it is possible that we have an opportunity to buy this pair, but as far as breaking out is concerned I think we are probably thinking something along the lines of next year.
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