With elections out of the way, the Norwegian Krone looks at oil and the Norges Bank

Norway held elections on Monday, and the results were “as expected”, with the Labor party, along with the Socialist Left and the Center Party,  clinching victory over Conservatives in a race that was primarily dominated by the country’s future in oil.  The Labor Party campaigned on new green industries.  However, with WTI Crude Oil up 2.5% today, that didn’t stop the oil export-led country’s currency from strengthening.  Add in a hawkish Norges Bank,  which is expected to hike rates next week from 0% to 0.25%,  and there is good reason for the Norwegian Krone to go bid!

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On a daily timeframe, USD/NOK formed a double top when price broke below the neckline of the formation on August 27^th at 8.7153.  The second candlestick at the top of the formation was an evening star, which indicated the possibility of a reversal ahead.  The target for a double top pattern is the distance of the height of the pattern added to the breakout point, which is near 8.3025.  After USD/NOK broke the neckline, price began trading sideways at the 50% retracement level from the April 29^th lows to the double top highs near 8.634 as traders waited for election day.  This formed a flag pattern.  Upon confirmation of the “as expected” results, USD/NOK continued its move lower and price broke below the bottom trendline of the flag on Tuesday, which continued today.  The target for a flag pattern is the distance of the flag “pole” added to the breakdown point, which is near 8.2605. 

Source: Tradingview, Stone X

On a 240-minute timeframe, price moved lower out of the flag pattern in an orderly downward channel formation.  Support is at the bottom trendline of the channel near 8.5608.  Below there, support is at the 61.8% Fibonacci retracement level from the previously mentioned timeframe (on the daily chart)  near 8.523 and then horizontal support at 8.4209.  However, notice that the RSI is diverging from price.  This is an indication that USD/NOK may be ready to bounce to the top trendline of the channel, near 8.6409.  If price fails to continue lower, horizontal resistance above is at the September 8^th highs of 8.772. Additional horizontal resistance is at 8.7770.

Source: Tradingview, Stone X

With elections out of the way, USD/NOK seems to have reverted to its normal self, which is trading inversely to oil and a hawkish central bank.  If oil continues to strengthen or if the Norges Bank indicates next week that they may hike again in the coming moths (ie remains hawkish), USD/NOK move to the double top target and flag target quite rapidly!

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