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Bullish Flag Pattern Foreshadows Higher USD/NOK!

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The dollar is looking much more bullish against the Norwegian Krone now, following the break above the key resistance zone of 7.4600 – 7.4930 zone at the back end of 2014. As mentioned in previous analysis, the weekly chart was always looking bullish following the aggressive run above the 6.3000 level as well as above the 7.0000 more recently.

The USDNOK violated some significant levels above the aforementioned zone, including the 7.6000 which coincides with the 200-period SMA on the 4-hour chart, as well as the 7.7360 level. However, as we can see on the daily chart, this upward move was halted by the key psychological level of 7.8600.

Going forward, until the end of last week, the 4-hour chart was looking a little bearish, with the move from 7.8600 to 7.4600, followed by the period of consolidation, creating a flag formation. This is typically a bullish continuation patter. Now that we’ve had confirmation of the bullish bias, as the price managed to remain above the key support zone of 7.4600 – 7.4930, the next target for the pair will be the 7.7360, which includes the upper boundary of the flag formation. If the pair can stay above this area, another test of the 7.8600 could be in the cards.

On the other hand, if the price retrace below the 7.6000, then I would expect the bears to drive the price lower and toward the key support level of 7.4600, a strong technical level over the short and medium term.

No clear signals have been given by the technical indicators. The Relative Strength Index has flattened and is hovering just above the 50 level while the MACD oscillator fell below its zero level for the first time since August 2014. However, the MACD oscillator is picking up and is now again above its trigger line.

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