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US Dollar Aims Higher vs NOK on Growth Outlook, Coronavirus

US Dollar Aims Higher vs NOK on Growth Outlook, Coronavirus

Dimitri Zabelin, Analyst
What's on this page

US Dollar Outlook, Coronavirus, Norwegian Krone, USD/SEK, USD/NOK – TALKING POINTS

  • US Dollar may rise against cycle-sensitive NOK and SEK
  • Weak growth data COVID-19 risks may sour risk appetite
  • Coronavirus threats derailing global recovery IMF warns


Last week, flash PMI data for February painted a worrisome picture for growth after the composite and services components registered contractionary readings of 49.6 and 49.4, respectively. While manufacturing did indicate an expansion at 50.8, it was below the 51.5 estimate. Analysts contributed the weaker figures to supply chain disruptions and reduced demand for tourism and air travel from the coronavirus.

Weakness in the services sector alarmed investors since it is serving as a proverbial moat keeping recessionary forces at bay. As a service-based economy with a strong reliance on consumption – over 70 percent – a crack in that foundation naturally shocked investors and caused Fed rate cut expectations to spike. Volatility-inducing data in the week ahead may inflame easing bets and could pressure the US Dollar.

However, the Greenback may rise against the commodity-linked Swedish Krona and Norwegian Krone since their very nature makes them more susceptible to oscillations in global sentiment. Sweden and Norway are export-oriented economies that strongly rely on robust external demand. This makes them comparatively more vulnerable to external shocks than the US Dollar which is typically sought after in times of financial distress.


Markets continue to be held hostage by anxiety about the coronavirus as it threatens derail global stabilization and acts as a “stark reminder of how a fragile recovery could be threatened by unforeseen events”. The IMF’s Managing Director Kristalina Georgieva’s words sent a chilling message to investors who only recently were able to enjoy comparatively less stress from cooling geopolitical tensions.


At the G20 Summit in Saudi Arabia, finance ministers and central bank governors convened to discuss the outlook for global growth as the coronavirus (COVID-19) continues to spread. US Treasury Secretary Steven Mnuchin said a clearer picture of the economic effects from the virus should be revealed in three to four weeks but noted that it was too early to tell what the longer-term impact will be.

Officials are expecting a short-term shock but for growth to recover in 2020 and 2021 amid cooling trade tensions. However, the latter is in large part determined by the 2020 US Presidential election and if that means a turn away from protectionism doubling down for another four years. With the global economy in such a fragile state, a political shock of that magnitude could induce significant cross-asset volatility.


USD/SEK recently broke through a critical resistance range between 9.7228 and 9.6878 (white-dotted lines) but is having trouble clearing the lower layer of the 9.8115-9.8618 zone (gold-dotted lines). USD/SEK’s retreat has put it back into a compression zone between the December 31 uptrend and resistance. Consequently, the pair may coil up in the purple-shaded area before bursting above 9.8115 or capitulating below the uptrend. The path of least resistance supports an upside breakout.

USD/SEK – Daily Chart

Chart showing USD/SEK

USD/SEK chart created using TradingView


USD/NOK is trading at 19-year highs, but negative RSI divergence and directionless trading since it broke the January uptrend suggests it may retest former resistance-turned-support at 9.2000 (gold-dotted line). If the pair bounces back from support, it could indicate an underlying bullish outlook for the pair’s trajectory. Conversely if the pair break below 9.2000 and 9.1389, it could mark the start of a bearish correction. Having said that, the fundamental environment is more supportive for a bullish resurgence.

USD/NOK – Daily Chart

Chart showing USD/NOK

USD/NOK chart created using TradingView


After reaching a three-year high, the US Dollar Index (DXY) suffered its biggest one-day loss since September 2019 and is coming dangerously close to retesting the once-broken January 2020 uptrend. The prior crack may have weakened the slope of appreciation’s durability which may collapse under the weight of a US Dollar selloff. If it breaks below the uptrend with follow-through, an aggressive decline may ensue.

US Dollar Index – Daily Chart

Chart showing DXY Index

US Dollar Index chart created using TradingView


--- Written by Dimitri Zabelin, Jr Currency Analyst for

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

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