- Summary:
- The unhinged rally of crude oil price pushed the USDNOK pair to the lowest level in more than 2 months. The falling coronavirus cases also provide catalyst
The USDNOK pair declined by more than 50 basis points as the crude oil price rallied today. This made the Norwegian krone the second best-performing currency in the developed world after the Australian dollar. It is now trading at 9.5550, which is its lowest level since March 11.
Crude oil price supports Norwegian krone
Norway is one of the biggest crude oil exporting countries in the world. It produces more than 2 million barrels of oil per day and exports most of it. This is because many people in the country drive electric vehicles because of the government incentives.
Therefore, the USDNOK pair tends to have an indirect relationship with oil prices. As the price of oil rises, the USDNOK falls as the krone strengthens. The vice versa is also true. Therefore, the pair rose by almost 30% when the price of crude oil declined sharply early this year.
Today, crude oil price is trading at the highest point in three months as traders await an important OPEC+ meeting. The meeting will come at a time when production in key countries is falling. For example, oil rigs in the United States have declined at the fastest pace on record. Similarly, recent data from Russia and other producers are cutting production as agreed. At the same time, demand is rising as more people go back to work.
USDNOK falls as Norway reopens
Another catalyst for the USDNOK weakness is the ongoing opening of Norway. Media reports show that many companies have started to reopen and that traffic congestion is starting to increase. This is because the number of new infections has dropped significantly.
For example, the country confirmed just six new infections yesterday. In contrast, the infections were more than 300 two months ago. Also, the number of active cases has declined to less than 300 from more than 8,0000 three months ago.
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USDNOK technical analysis
On the daily chart, the USDNOK pair has been on a downward trend. The pair is trading below the 50-day and 100-day exponential moving average while the RSI has been on a downward trend. The price has also moved below the 61.8% Fibonacci retracement level. Therefore, the downward momentum may continue as bears target the next support at 9.500.
On the flip side, a move above the 61.8% retracement level of 9.8718 will invalidate this prediction.
Brent crude oil price technical outlook
The Brent crude oil price has been on an upward trend, reaching a high of 39.13. On the daily chart, the price is along the 100-day EMA and is between the 38.2% and 50% retracement level. Therefore, a clear break above the 100-day EMA means that the pair will continue rallying as bulls attempt to move above 40. On the other hand, a move below the 38.2% retracement at 37.10 will mean that there are more bears in the market.