USDNOK retreat from recent highs after Norges Bank in an emergency move voted unanimously to cut the rates by 50 basis points to 1%, in an attempt to offset the coronavirus outbreak impact. The central bank noted that there is considerable uncertainty about the duration and impact of the coronavirus spread, with a risk of a pronounced economic downturn.
The Monetary Committee is monitoring developments closely and is prepared to make further rate cuts if needed. To ensure that the rate passes through to money market rates, Norges Bank offers extraordinary 3-month F-loans for as long as deemed necessary. The F-loans will be fully allotted at an interest rate equal to the prevailing policy rate.
Norges Bank has more room for easing, and many analysts expect that the bank might proceed with one more rate cut by the end of the year. The falling oil prices are a headache for the Norwegian economy while the NOK currency has dropped to historic levels against the USD.
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USDNOK Technical Outlook
USDNOK trades 1.44% lower at 10.0193 as the pair retreat after the recent rally amid the crude oil price sharp drop, as the rally that started in early 2020 accelerated amid the coronavirus outbreak. The pair trading in overbought territory and a sharp correction can be ruled out.
On the downside, initial support for USDNOK will be met at 10.0325 the daily low. If USDNOK breaks below, the next support is at 9.6878 the low from the trading session yesterday. More bids would emerge at 9.5467 the low from March 11th.
On the other hand, the first resistance stands at 10.2406 the daily top. A settlement above that level today might challenge the recent highs at 10.2758. A break above might open the way for the 10.5000 psychological resistance.
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