A recovery of crude oil price is fuelling strength in the Norwegian Krone, sending the USDNOK down 0.47% on the day to 10.26704. The Norwegian Krone was able to start reversing the losses suffered in the Friday session with gains against the US Dollar as the crude oil price benchmarks hosted some bullish action today.
The price changes occur against the backdrop of economies slowly opening across the world. Markets expect to see an increase in demand for crude oil derivatives to help relieve the overflowing storage facilities, barges and tankers dotted across oceans all over the world. The kick-in of the OPEC +’s crude oil production cuts are also fuelling the short-term price appreciation.
Brent crude oil price was trading nearly 5% higher on the day at just under $30 a barrel, after last seeing these levels in mid-April. However, overall fundamentals continue to remain weak, which may limit the gains seen on crude oil so far. Furthermore, a restart of another trade war is also on the minds of traders and the risk-off sentiment this could generate may pose headwinds for Norway’s commodity currency.
Following last week’s breakdown of the ascending channel on the daily chart, the USDNOK was able to break down the 61.8% Fibonacci retracement. A pullback move was rejected at that level, followed by the pinbar candle which closed below that price level, this completing the breakdown. The pair is now heading downwards and is expected to encounter the April 7 and April 9 lows at 10.11403. A breakdown of this level continues the decline towards 9.84670 (78.6% retracement) and the February 28 high at 9.48835.
On the flip side, a bounce at the 10.11403 support could offer the opportunity for a retest of 10.32810 and 10.500. The 50% retracement at 10.66623 offers itself as a resistance level and a possible pitstop before 10.83502.