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Crude Oil May Fall with NOK on Coronavirus, Key Economic Data

Crude Oil May Fall with NOK on Coronavirus, Key Economic Data

Dimitri Zabelin, Analyst

NORWEGIAN KRONE, SWEDISH KRONA, CORONAVIRUS, STATE OF THE UNION ADDRESS – TALKING POINTS

  • Crude oil prices, Norwegian Krone may fall on coronavirus contagion fears, key PMI data
  • Brent, NOK may trim losses on State of the Union Address if fiscal policies are highlighted
  • Solid corporate earnings may amplify market mood, counter sentiment-sapping coronavirus

CORONAVIRUS FEARS SOURING MARKET MOOD

Concerns about the economic impact of the coronavirus continue to infect market mood and prompting aggressive declines in sentiment-linked currencies and equity markets. The cycle-sensitive Swedish Krona and Norwegian Krone along with crude oil prices have experience significant selling pressure while their anti-risk counterparts like the US Dollar and Japanese Yen have prospered.

Chart Showing Coronavirus Infected Areas

Chart showing coronavirus infections

Graphic created by Johns Hopkins CSSE

Chart Showing Swedish Krona, Norwegian Krone Index, Crude Oil Prices – Daily Chart

Chart showing NOK, SEK and Crude OIl

Crude oil prices chart created using TradingView

STATE OF THE UNION ADDRESS MAY BOLSTER RISK APPETITE

Despite the sentiment-sapping nature of the coronavirus outbreak, commodity-linked currencies and Brent may nurse some of their losses after US President Donald Trump delivers his State of the Union address. As highlighted in my outlook on gold prices, the Commander in Chief may allude to expansionary fiscal policies that could spur demand and stimulate economic growth ahead of the 2020 election and boost risk appetite.

KEY ECONOMIC DATA MAY TRIM GAINS IN NOK, BRENT

On February 3, a cascade of critical PMI statistics will be released primarily from emerging market states which could serve as a useful barometer in gauging the economic health of frontier economies. While there are expectations that the reports will show signs of recovery as part of a broad theme of global stabilization, panic about the coronavirus may have led supply chain managers to give a gloomier outlook for future demand.

See a complete list of PMI statistics to look out for here!

DATA TO WATCH IN EUROPE

German factory orders for December will be a closely-scrutinized data release since it will provide traders a glimpse into the strength of the largest Eurozone economy. For Nordic traders this will be particularly important to watch since approximately 80 percent of all of Sweden’s and Norway’s exports are destined for the EU. Both Nordic countries will also have a cascade of domestic data released including PMI and GDP.

However, the scope for these data releases eliciting strong volatility may be relatively muted as markets focus on fundamental themes like the coronavirus. Furthermore, the outward-facing nature of the Nordic economies makes them particularly sensitive to external shocks and shifts in sentiment. The latter may therefore be a bigger factor in determining NOK and SEK’s price action than domestic economic statistics.

USD/SEK TECHNICAL ANALYSIS

USD/SEK has shattered a key congestive range between 9.4996 and 9.5323 but bullish price action appears to be showing signs of weakness as the pair retreat from resistance at 9.6878. Failure to clear it could lead to a retest of the prior support range, while a break above it with follow-through could inspire further gains if traders feel confident enough to retest multi-decade highs.

USD/SEK – Daily Chart

Chart showing USD/SEK

USD/SEK chart created using TradingView

CRUDE OIL PRICE CHART

After reaching May 2019 highs in early January, crude oil prices have since declined over twenty percent and is now trading below $60 a barrel. On Friday, Brent briefly flirted with support at 55.90 before closing slightly higher. Looking ahead, crude oil may aim to test an over 12-month floor at 53.06, which if broken, opens the door to further losses at multi-year lows.

Crude Oil Prices – Daily Chart

Chart showing crude oil prices

Crude oil prices chart created using TradingView

USD/NOK OUTLOOK

USD/NOK has recovered a little over five percent after bottoming out in in early January at 8.7692, though recent price action suggests the pair’s rally may experience a short-term bearish correction ahead. Unless the pair is able to surmount resistance at 9.2155, USD/NOK may fall back to support at 9.1407. However, if the pair manages to clear the ceiling with follow-through, the next target may be the October high at 9.3057.

USD/NOK – Daily Chart

Chart showing USD/NOK

USD/NOK chart created using TradingView

NORWEGIAN KRONE TRADING RESOURCES

--- Written by Dimitri Zabelin, Jr Currency Analyst for DailyFX.com

To contact Dimitri, use the comments section below or @ZabelinDimitrion Twitter

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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