Tickmill News: Top Trade Opportunities After Ukraine War: Euro vs. Norwegian Krone

Trade between the Euro and the Norwegian Krone is being considered for the aftermath of the Ukraine war: Top Trade Opportunities

When crude oil prices are rising, the Norwegian Krone tends to appreciate versus the Euro. Norway is a prolific exporter, with a current account surplus that has averaged more than 6% of GDP over the last 40 years. Much of this prosperity may be attributed to energy sales to the Eurozone.

This suggests a consistent underlying drain of Euros from the currency bloc to Norway. When the price of crude oil rises on global markets, this is predictably exacerbated. A higher barrel price encourages capital flows out of EUR and into NOK. As a result, the Krone is trading at three-year highs versus the Euro, as Russia's invasion of Ukraine fuels supply disruption worries, driving oil prices skyrocketing. Sanctions imposed by the West have hampered Russian exports, pinching an already constrained post-pandemic market.

12-MONTH ROLLING CORRELATION OF EUR/NOK VS. BRENT CRUDE OIL

A complete restoration to pre-war 'normalcy' is improbable. Germany and other important Eurozone economies have publicly committed to diversify away from Russian energy, putting a pressure on the regional supply/demand balance and seeming to drag the EUR/NOK down in the long run.

Nonetheless, the cessation of military action will almost definitely provide some respite. This suggests that a short-term alleviation of shortage worries may cause oil prices to rise before structural factors reestablish their control, resulting in a tighter market overall.

This suggests that a short-term rally when the guns fall quiet may provide an opportunity to sell into the longer-term downturn for EUR/NOK. Positive RSI divergence indicates that bearish momentum is fading, even if the bigger trend is still pointing lower after last year's collapse.

A rebound from immediate support at 9.3867 targets a past swing low that has been recast as resistance at 9.6624, with a break above that aiming for the inflection point at 9.9004. Probing over the 10.00 mark is possible. Breaking support, on the other hand, seems to first reveal 9.1587.

SPOT EUR/NOK (WEEKLY CHART)