This was one of the trades discussed on Money in Motion. The idea is that oil will be going up again and rather than using commodities to make money on the move, it’s possible to use currencies. Since Norway is an oil rich country it is the subject of the trade. In order to buy oil, foreign countries have to convert their money into that of the seller. This increases demand for the Norwegian Krone. The USD has some interesting technicals in relation to the Krone which makes it an complimentary currency to the trade.
On this weekly chart we can see multiple bottoms in Q4 2009. Since we’re below that support, it will act as resistance. The USD/NOK pair is in a channel now. This week it neared the upper end of the channel which also is at resistance from Q4 2009.
We would want to wait for a bounce off the trend line and support before shorting the USD and getting long the NOK. Variations on this entry should be made to accommodate a bounce down.
Sell Limit: USD/NOK 5.55000
Buy Stop: USD/NOK 5.60000
Buy Limit: USD/NOK 5.30000
This gives us roughly $100 of risk per contract with a maximum gain of $500 per contract if we hit 5.30000