USDNOK Reinforces Downside Move After Sharp Drop in Crude Oil Inventories

Summary:

Sharp drop in crude oil inventories allows the USDNOK to maintain the downside push, as crude oil prices rise for the 4th straight day.

Crude oil stockpiles in the US slumped sharply last week, according to the crude inventories data just released by the Energy Information Administration (EIA). Crude oil inventories dropped by 8 million barrels in the week ended October 30, versus the 300,000 barrels that the markets expected to be added. This figure was also a sharp drop from the 4.3million barrels that were added to the stockpiles the previous week.

The data helped to reinforce the rise in crude oil prices on Wednesday. Crude oil prices on the Brent benchmark are up nearly 2% on risk-on sentiment, which extends the winning streak on the price of the black gold to 4 days.

The oil-linked NOK has benefitted from the crude oil price situation and is building on yesterday’s gains against the greenback. The USD itself is under pressure from today’s risk-on plays, but this could change in an instant if the US elections head towards a legal challenge.

The battleground states are undecided, and both candidates still have a path to the White House, even though this path is now narrowing for the incumbent.

Technical Outlook for USDNOK

After starting the day on a higher note, the USDNOK lost ground rapidly in the middle of the London session and is now 0.45% lower. This move has allowed the pair to violate the 9.37463 support, with 9.22531 well within sight if sellers take out the current support level with the required confirmation parameters. Further downside brings in 9.04414 within reach.

On the flip side, there is the risk of safe-haven demand crawling back into the markets from US election happenings, especially if the undecidedness of the vote drags on. This may allow a run towards the 9.48835 resistance, with the 200-day moving average (which has served as recent resistance) also coming into play. Only a clear breakout of this level brings in 9.80889 into view, with 10.13330 serving as an additional target to the north.