The USDNOK fell today as the Norwegian Krone gained strength from the Norges Bank’s decision to maintain interest rates at current levels. The NOK gained 0.4% against the US Dollar as Norway’s central bank left the key interest rate unchanged at 1.5% as was expected by the markets and by analysts.
The central bank in its statement, played down the likelihood of hawkish action in 2020, but there is still a hiking bias, with a 40% probability of a rate hike in late 2020 or early 2021. The Norges Bank noted that inflation was close to its set targets, and that wage growth would remain moderate.
The bank also noted that its expectation for a weaker Krone would be for this to trigger a higher policy rate path, but also noted that this would be balanced out by a more moderate than expected expansion of the Norwegian economy. The Norges Bank noted that there could be room for adjustment of the monetary policy if the balance just mentioned was out of sync.
“Going forward, among the factors that will be important to observe, we note the impact the weak NOK will have on price and wage inflation”, said the Norges Bank in its rate statement.
The USDNOK fell on the news as the decision was viewed as NOK-positive. The USDNOK is trading at 8.97963 as at the time of writing, which is where the neckline of the double bottom pattern of Sept 10-19 is located. This is therefore a minor support. If this support level is able to hold, USDNOK may bounce from this level and target the next resistance price level at 9.04726. This is where we have previous highs that occurred on Aug 16 and Dec 18, as well as previous lows of Sep 26 and Oct 11 in role reversal.
On the flip side, continuation of the downward push of USDNOK which breaks the neckline support could open the door towards 8.91068 (double bottom troughs), with 8.9795 lying closely in wait if the 8.91068 price level gives way. 8.80393 is a very major support level which is a role reversed support area which was formerly a multi-month resistance seen on Dec 24, 2018 as well as March 7, 2019. It is also the site of multi-day highs that occurred throughout May 2019.