USDNOK currency pair on Forex

Until recently, USDNOK was considered to be in the second group of interest for traders after such instruments as GBP/USD and EUR/USD.

This was due to the fact that USDNOK had low liquidity compared to the currency pairs listed above, so it was of greater interest to investors rather than traders.

USDNOK is composed of two currencies: the US dollar and the Norwegian krone .

When it comes to the dollar, almost everyone knows the factors that influence its movement, but few of you have considered what drives the price of the Norwegian krone.

Norway is the fifth-largest producer and exporter of black gold.

Oil is the foundation of the country's economy, and the ability to supply raw materials to various countries has always significantly filled the state budget.

Traders also used this instrument less for speculation and more for risk diversification, as the currency's growth was always predictable. Norway demonstrated the stability of its economy to the world after the major global crisis of 2007-2009, which, thanks to sound government policy, was virtually untouched.

Thus, Norway's unemployment rate remained below 3.7% during the global crisis. Thanks to oil sales, Norway was able to accumulate a safety net, which experts estimate at $875 billion.

However, despite its strong economy, Norway has an Achilles heel. The country's economy is highly dependent on the energy market, specifically the price of oil. It's generally believed that when oil prices rise, the NOK (Norwegian krone) exchange rate also rises. A decline in oil prices leads to a deterioration in the Norwegian economy, which is immediately reflected in a decline in the national currency. You can see this relationship by looking at the oil and NOK chart.

Since the USD/NOK currency pair consists of two currencies, the dollar's influence on the price chart shouldn't be ignored. For example, if the dollar weakens due to poor economic indicators, the pair's price chart will also rapidly decline, while with positive indicators, it will begin to rise. This is due to simple numbers: if the dollar has fallen in value, it means we can buy more dollars for fewer crowns than if the dollar had risen.

At this point, USDNOK should be of interest to traders only because the sharp decline in oil prices is leading to a decline in the krona, which in turn is driving the USDNOK pair up. By following news on the black gold, it's easy to predict future price movements, which is why this instrument is becoming increasingly popular. Many analysts believe the krona's decline will continue as long as the price of oil continues to fall.

However, it's worth remembering that Norway has a large safety net, and if necessary, the authorities will draw on it to support the country's economy. So until that happens, it's worth keeping a close eye on oil price movements and trying to profit from them. Thank you for your attention, and good luck!