Marshall Gittler
Trading Analysis
USD/NOK
The dollar traded higher against almost all of its G10 peers during the European morning Tuesday. It was lower only against NOK.
The euro plunged against the dollar after the Eurozone’s CPI slowed to +0.3% yoy in September, its lowest level since November 2009. Core CPI also slowed, showing that this was not due only to lower oil and other commodity prices. The unemployment rate remained unchanged in August as was broadly expected. With only two days before the ECB meeting, the data shows that the risk of deflation remains in the Eurozone. The impact of the recent measures from the ECB are yet to be reflected in the data and the economy will take more time to respond to them.
The Norwegian krone was the only gainer against the dollar after the country’s central bank announced that it will start selling foreign exchange equivalent to NOK 250 mln per day in October. Norway will start for the first time to convert some of the oil revenue it gets in foreign currency into NOK to cover increasing budget needs. On top of that, the nation’s retail sales excluding volatile items rebounded in August. Nevertheless, the need to convert oil revenues to cover budget needs raises concerns about the country’s finances.
USD/NOK moved lower after it failed to break the 6.4600 (R1) resistance level but bounced back once it found support at the 6.4000 (S1) zone. A break above the 6.4600 (R1) level could trigger a bullish extension towards the psychological line of 6.5000 (R2), on the other hand, the failure once again to break up from this level raises some doubts. On the daily chart, I still see a longer-term uptrend from a technical view. The rate is printing higher highs and higher lows above the light blue uptrend line drawn from back at the low of the 8th of May.
Support: 6.4000 (S1), 6.3600 (S2), 6.3170 (S3) .
Resistance: 6.4600 (R1), 6.5000 (R2), 6.5530 (R3) .
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