The USDNOK pair will be in focus as the central bank of Norway, the Norges Bank, gets set to make its latest interest rate decision public on Thursday, 20 August at 10.00 GMT. Analysts are expecting the key interest rate to remain unchanged at 0%. Norway has mostly kept the coronavirus situation in its country under control and is not expected
to suffer the same economic devastation as other countries in Europe and around the world. It also has a highly diversified economy which relies more on exports of agric commodities rather than its energy commodities.
As such, it was hardly surprising when the Norges Bank announced in June that it could start to raise rates as early as 2022. Therefore, I do not expect the Norges Bank to touch the interest rate anytime soon. It is possible, though, that the bank may make adjustments to its economic forecasts, which could allow it to tamper with rates sooner. This is what traders would probably be watching out for.
Otherwise, the USDNOK’s short-term price direction will continue to be dictated by the direction of crude oil prices as well as the sentiment on the US Dollar. The weak USD sentiment has allowed the USDNOK to drop from the March 2020 high of 12.1224 to a current price of 8.85995.
Outlook for the USDNOK
The pair has breached the long term support trendline that connected the price lows from July 2019 to the present time. However, this breakdown move has stalled at the 8.80393 support (previous highs of 24 December 2019, 4 March 2019 and 20 May 2019 as well as low of 30 December 2019).
A breakdown of this support allows the USDNOK to aim for the 8.49596 price level, which is the 78.6% Fibonacci retracement level from the swing low of January 2018 to the swing high of March 2020. The lows of 20 January 2017 and 15 October 2018 also form new lows at 8.18807, and this will serve as the next support if 8.80393 gives way.
On the flip side, a bounce from current levels allows the USDNOK to recover towards 9.22531, with 9.48835 and 9.80889 forming additional resistance levels to the north.