USD/NOK moved marginally lower during the European morning

USD/NOK

In a relatively quiet European morning from economic news, the dollar traded unchanged against most of its G10 peers on Wednesday. It was higher against SEK and JPY, in that order, while it was lower against GBP and NOK. EUR traded stable, reflecting the restrained mood of investors ahead of the meeting of Eurozone finance ministers later in the day.

In Norway, the GDP grew 0.9% qoq in Q4, a further expansion from +0.5% qoq in Q3. The better-than-expected growth rate pushed USD/NOK down approximately 0.50% at the news, but recovered quickly and traded little changed from its pre-release level. On top of the solid inflation rate released on Tuesday, this is likely to take off some pressure from the Norges Bank to cut rates at its March meeting. Nevertheless, the low oil prices still weigh on the Norwegian economy, and a rate cut in a future meeting seems inevitable. On these terms, NOK is likely to remain vulnerable.

In Sweden, the PES unemployment rate increased to 4.4% in January from 4.3% previously, suggesting that tomorrow’s official unemployment rate may also pick up slightly. With just a day ahead of the Riksbank policy meeting, the weak employment figure weakened SEK in the anticipation of further rate cut. However, we believe that following the rise in the monthly CPIF inflation rate in December, the pressure for the Bank to introduce additional measures has lessened. The Bank is most likely to introduce some macroprudential measures, such as a mortgage cap to avoid over-heating the housing market, and to further postpone the first increase of the repo-rate until the 1H of 2017. Given that the market expects a rate cut, such an outcome could strengthen SEK, at least temporarily.

USD/NOK moved marginally lower during the European morning Wednesday, but stayed between both the 50- and the 200- period moving averages. Both these moving averages are pointing east, while both our near-term momentum studies lie near their neutral lines pointing sideways as well. These technical signs show that the intraday bias of the pair is flat. However, the overall trend is to the upside, thus I would expect the bulls to eventually take control and drive the rate higher. On the daily chart, USD/NOK is trading above both the 50- and the 200- day moving averages and above the longer-term uptrend line drawn from back at the low of the 3rd of September (light blue line). A decisive move above the resistance of 7.7000 (R2) is likely to confirm that the longs are back in the game, and could prompt extensions towards the key barrier of 7.8400 (R3).

• Support: 7.5000 (S1), 7.3750 (S2), 7.3000 (S3).

• Resistance: 7.6500 (R1), 7.7000 (R2), 7.8400 (R3).