The Norges Bank is scheduled to meet this Thursday in a widely anticipated meeting to decide on the ínterest rates in Norway. The general market expectation is for the Norges Bank to hike interest rates, having been able to control the local coronavirus epidemic with evidence of economic recovery on several fronts.
The currency in focus is the EUR/NOK, which is the pairing of the Norwegian Krone where a clear divergence in fundamentals is playing out. The Krone has been supported by rising crude oil prices, and the Euro has been on a downward trend as policymakers within the board of the European Central Bank have doubled down on their dovish stance by maintaining the scale and scope of the PEPP. The chaotic vaccine rollout and the halting of the AstraZeneca vaccinations in at least 8 European countries puts more pressure on the beleaguered single currency, heading into Thursday’s meeting.
Commencement of a higher interest rate pathway this Thursday could be the trigger for the EUR/NOK to hit sub-10.00 levels this week, as long as there is additional support from rising crude oil prices. This support is necessary as the rate hike has been priced in by the markets. Bears on the EUR/NOK will be looking for a possible rally-sell opportunity at 10.14502 or 10.20324, targeting a breakdown of the channel at 10.01146, for an approach towards sub-10.00 targets at 9.89889 and 9.83219 respectively.
On the other hand, a rally beyond 10.29497 could invalidate the bearish bias, with a push for 10.44506 on the cards. Beyond this point, 10.63684 becomes a new target. This trajectory could follow a surprise hold on interest rates or a fall in crude oil prices.