USD/NOK Headed South to 5.8780

Last updated 7/27/2009 1:40 PM EST (GMT -5) 6 Comments

Forex Trading involves high risks, with the potential for substantial losses and is not suitable for all persons. Past performance is not necessarily indicative of future results.

Roger A. Stojsic

Technical Analyst, GFT

Relatively recent price action suggests USD/NOK bearish momentum is intact based on the failure to close above 6.6 (see double top at point C on the daily) along with the bearish gap this weekend. A break below previously established support near 50% on the weekly chart likely to spark further losses down to converging fib support near 5.8480-5.8150. Not only does this level reflect the 61.8% weekly retracement, but also the 161.8% fib extensions of the more recent XA and BC rallies (see daily chart) giving us a potential bullish butterfly pattern completion near this converging support. This future support may provide profit targets to the short side, or a potential buy off the butterfly pattern completion. This move lower, should it occur, would likely take several days to complete so we'll reassess the potential buying opportunity if/when prices approach point D. Again, the key this bearish continuation will be a break/close below previously established support at point B (6.1150) as we may see an initial bounce near this level.

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  • Weekly Chart - Room down to 61.8% if prices move below 50%
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  • Daily Chart - Emerging bullish butterfly pattern projected to complete near D

Comments (6)

DP

July 28, 2009 at 11:25 AM ET

Hi Roger,

Thanks for a timely article.

I have been following the NOK for a month or two now wondering why it has not performed quite as well as other oil linked currencies. Suddenly Bloomberg cites it as the favourite amongst analysts to appreciate the most in the coming 12 months against the EUR and you are also obviously closely monitoring things.

I decided to take a small bearish position in the USD/NOK pair today and alas received an education in the volatility of this pair which I assume results from lower liquidity. (If it is another factor then please elaborate.)

Are there particular risk management methods that you apply when trading less liquid currency pairs. Today alone the pair has dropped and regained over 350pips and I am interested in how you deal with such pairs when planning a trade. I ask this because there is not the easy 2 pip spread side door on this pair to make a hasty exit through in fact the lowest spreads I have managed on USD/NOK are 25-30 pips and 50-55pips on the EUR/NOK pair.

Look forward to your thoughts.

Cheers!

rstojsic

July 30, 2009 at 11:16 AM ET

risk management methods do not change regardless of which pair is being traded. in other words, exits are pre-determined and position size is adjusted to reflect a percentage of total equity (1-3%, for example).

arapahoe

September 10, 2009 at 09:32 AM ET

didn't this hit T2 yesterday 9/9/09? should it not be in the closed trade section?

arapahoe

September 10, 2009 at 03:20 PM ET

I really don't know where else to put this. This morning there was a "trade in progress" NZD/USD that was entered @ .6951 and was stopped out today at .7018 and although it has been removed from the "trades in progress" it is not showing up in the "closed trades' as a 67 pip loser.

Was this just an oversight?

bgareiss

September 10, 2009 at 03:24 PM ET

Hey Arapahoe, that was my trade. It was closed out and put on the closed trades. The loss is actually 134 pips because we assume people put on one lot for T1 and one lot for T2. Therefore, we double the loss on our losses. I know it isn't a perfect system to track trades, but it is the best we can do. Brad

arapahoe

September 10, 2009 at 03:48 PM ET

Thanks! for the info. I'm new to this (as you can tell) and I'm trying to see how accurate your strategies are and how I may be able to learn how to
use them in the future.

I love your articles by the way. Especially about trading psychology.

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