USDNOK spikes after a worrisome contraction of Norwegian economy

The USDNOK pair rose today as the market reacted to Norway’s first-quarter GDP data. The numbers, released by Statistics Norway, showed that the country’s economy contracted by a fast rate than what most analysts were expecting.

Norway GDP data

According to Statistics Norway, the country’s economy contracted by 1.5% in the first quarter after growing by 1.5% in the fourth quarter of last year. In the same quarter, the mainland GDP declined by 2.1% in the quarter after expanding slightly by 0.1% a quarter before. The mainland GDP data excludes the vast oil and gas sector in the country.

Data from the country showed that accommodation and food service activities were the most affected in the first quarter. This industry dropped by more than 35% as more companies shut their operations to comply with social distancing measures. Other weak performers were arts and entertainment, transport activities, and health and social work. Among the best performers were manufacturing and wholesale and trade activities.

The GDP also contracted because of a sharp decline in household consumption. The data showed that consumption dropped by 11.7% in the first quarter. This was mostly due to a sharp decline in service consumption. Furthermore, investments declined by 5.1% in the first quarter.

As one of the biggest oil producers in the world, Norway has been affected by the sharp decline in crude oil prices.

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USD/NOK technical outlook

On the 2-hour chart, the USDNOK pair rose to an intraday high of 10.3660, which is slightly above the 23.6% Fibonacci retracement level. The price is also slightly above the 50-day and 100-day EMA while the RSI has been on an upward trend. Therefore, I expect the bulls to remain in total control as they attempt to test the 50% Fibonacci retracement level at 10.4725.

On the flip side, a move below 10.2628 will invalidate this trend. This price is slightly below the 23.6% Fibonacci retracement level and along the 50-day EMA.

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