The Norwegian Krone is down on the day, marking a 3rd straight day of losses as crude oil prices remain capped around the $44 mark over concerns about dwindling demand from renewed lockdowns, and the impact of the reduction of the production curbs by the OPEC + alliance that have taken effect as from August 1.
Demand concerns have arisen as a resurgent coronavirus outbreak in first several countries across the world stoked fears of renewed lockdown which could shutter-in factories and lead to reduced utilisation of crude oil stocks and refined fuels. Furthermore, the reduction in the production curbs by the OPEC alliance in last month’s meeting to the tune of two million barrels per day took effects on August 1. there are concerns that the rise in production output that has resulted from this action could lead to oversupplies in the market, further capping price increases.
As of the time of writing, Brent crude remains capped at $44.30, thus remaining stagnated around the critical price resistance that has held sway for several weeks. This has also put some pressure on the Norwegian Krone, which is a crude oil correlated asset. Consequently, the USD/NOK pair finds itself trading at 9.11663, allowing the pair to stage a 0.39% gain for the week.
The USDNOK has found the downside move limited by the presence of an ascending support trendline, which presently connects the lows of price action from September 2018 till date on the weekly chart. A bounce on this line by the weekly candle will bring it into a direct challenge with the 9.22531 resistance line (February 17 and June 8, 2020 lows), with 9.48835 and 9.80889 (June 15, 2020 high) lining up as future resistance targets. This move will likely follow a steep decline in crude oil prices.
If there is support from rising crude oil prices, we could see a breakdown of the ascending support line by the price action, which opens the door towards the 8.80393 support target (December 2018, March/May 2019 highs and December 2019 low). Below this area, 8.50000 (78.6% Fibonacci retracement from swing low of January 2018 to the swing high of March 2020) beckons.
