Nordea Bank is predicting that the Norwegian Krone could strengthen within the next two years once the Norges Bank resumes rate hikes. Nordea is also citing rising crude oil prices as a catalyst for this strengthening.
According to economists at Nordea, this situation could lead to a decline in the EUR/NOK. However, the prediction for the USD/NOK is more conservative, as they expect a slightly stronger dollar to move the USD/NOK into consolidation.
Expansion of coronavirus vaccinations means that global recovery could spur higher oil prices, translating into a stronger NOK. A rate hike could come before the end of 2021, notes Norges Bank. An improved outlook for the Norwegian economy makes a case for such a hike, further strengthening the NOK.
Norges Bank cites relative inflation and robust central bank policy as factors favouring the USD against EUR. It now believes the greenback will outperform the EUR this year, hence the conservative outlook for the UD/NOK.
Technical Outlook for USDNOK
The pair closed below the 8.39643 support line yesterday, putting it in a strong position to break down this support line. If the current daily candle closes below this line, the breakdown is confirmed. This opens the door towards 8.29611, with potential to drop to 8.18807 as well.
On the flip side, only an upward retracement that breaches and closes above the rectangle’s border at 8.39643 negates the downside break. A further extension to the upside may then aim to test the 8.65723 resistance, with 8.80393 serving as an additional barrier to the north. Otherwise, a pullback may simply retest the rectangle’s lower border and lead to rejection and renewed selloff on the pair.
USD/NOK Daily Chart