USD/NOK declined during the European morning Monday

USD/NOK

The dollar traded unchanged or lower against its G10 peers during the European morning Monday. It was lower against NOK, JPY, GBP, SEK and NZD, in that order, while it was stable against CAD, EUR, CHF and AUD.

The euro was stable vs the dollar, even after manufacturing growth in the Eurozone slowed further in November. In Germany, which not long ago was considered as Eurozone’s economic growth engine, the final manufacturing PMI contracted for the second time in three months. The poor data confirmed that the country has lost the growth momentum seen earlier in the year. On the other hand, France’s final manufacturing PMI was revised up from the preliminary reading. It remained however in its contractionary territory. On top of the slowdown in inflation rate seen last Friday, the weak manufacturing data could trigger concerns of stagnation in the bloc’s growth and add further selling pressure on euro.

The Norwegian krone gained the most against the greenback after the country’s manufacturing PMI exceeded expectations of a moderate decline and moved further into its expansionary territory. USD/NOK dipped approximately 1% as the positive manufacturing data takes off some pressure from the Norges Bank to take action in response to the ongoing falling oil prices. Since oil prices could weaken even more, I could see any USD/NOK setbacks as providing renewed buying opportunities.

USD/NOK declined during the European morning Monday after finding resistance at 7.0600 (R1). I would now expect the decline to continue and challenge the resistance-turned-into-support barrier of 6.9300 (S1), defined by the high of the 5th of November. A dip below that line could extend the tumble and perhaps target the next support, at 6.8700 (S2). Our short-term oscillators support further pullback. The RSI exited its overbought territory, crossed below its black upside support line and is now pointing down, while the MACD has topped and appears able to fall below its trigger line any time soon. However, as long as the rate is trading above the black uptrend line drawn from the low of the 3rd of September, I would consider the near-term picture to remain positive and I would treat the current pullback, or any extensions of it, as a corrective wave before the bulls take control again. On the daily chart, USD/NOK stands above the 50- and the 200-day moving averages and well above a longer-term uptrend line taken from back at the low of the 8th of March. This confirms that the overall outlook of the pair is to the upside.

• Support: 6.9300 (S1), 6.8700 (S2), 6.8000 (S3) .

• Resistance: 7.0600 (R1), 71600 (R2), 7.3000 (R3).