- In my daily analysis of exotic currency pairs, the US dollar against the Norwegian Krone is one that I'm watching very closely due to the fact that we have bounced from a major support level.
- The 10.4 level is an area that's been important multiple times, and it is worth noting that we have positive divergence on the Moving Average Convergence Divergence indicator.
- This can mean something important, as it shows that the downward pressure and momentum might be running out.
The size of the candlestick is very strong, and it does make a certain amount of sense that we've seen this type of bounce just simply due to the oversold condition of the greenback in general. Remember, the Norwegian Kron is a commodity-based currency and of course a small one. So, the volume in this pair is quite a bit lower than it will be in many others. With this being the case, I think the situation here is more or less a buy on the dip scenario. And I think that buy on the dip scenario probably plays out for quite some time. We could see the US dollar rally all the way to the 11 level, which is an area that previously had been resistant.
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If we were to turn around and break down below the 10.4 level, then it could send this market much lower but really, I think at this point that seems less likely after the session that we have had on Wednesday. I don't necessarily think we go straight up in the air, but I do think that we have more of a grind to the upside as things can only go in one direction for so long.
All things being equal, it is worth noting that the US also produces a lot of oil itself, so this pair has moved beyond the “oil correlation” that it previously enjoyed. At this point in time, I believe a lot of this comes back down to risk appetite.
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