The Norwegian Krone is staging a recovery as the USDNOK retreats off record highs, buoyed by strengthening oil prices over the last three days. Brent crude oil was able to push off 17-year lows after the Hubei provincial government announced it would ease the coronavirus lockdown, gaining 10% in the previous 2 days to trade at 28.43 as at the time of writing. This situation has helped bolster commodity currencies such as the Norwegian Krone, which have seen their values eroded by falling crude oil prices and a strong US Dollar in the last two weeks.
The Norges Bank had cut interest rates for the first time in 4 years last week to stave off the economic impacts that have emerged from the coronavirus outbreak. With about 2,715 confirmed cases as at the time of writing, Norway is ranked the 14th most affected country in terms of the coronavirus outbreak.
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Technical Outlook for USDNOK
An ascending trendline which connects the lows of price from March 11 to date on the 4-hour chart constitutes major support. This trendline also intersects the horizontal support line formed by the 38.2% Fibonacci retracement line at 10.9791. Price has found intraday support at this level.
A breakdown of this price support (i.e. break of the ascending trendline and the horizontal support) opens the door for further recovery of the Norwegian Krone, allowing the USDNOK to target the 10.6458 price level. This is the next support formed by the 50% Fibonacci retracement and is also close to the previous high seen on March 18.
On the flip side, a bounce of the USDNOK would coincide with a rejection of Brent crude, which is currently facing resistance. Refusal by the current resistance on the Brent crude could weaken the Norwegian Krone, allowing the USDNOK to retest the 11.3915 resistance. A descending trendline that encloses the 4-hour candles of the last three days may also pose a threat to further uptick of the USDNOK beyond this level. This could set up a breakout scenario from the symmetrical triangle that forms.
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