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Norges Bank Preserves Key Policy Rate: USD and EUR/NOK to Consolidate

Norges Bank Preserves Key Policy Rate: USD and EUR/NOK to Consolidate

Jeremy Wagner, CEWA-M, Kara Dailey,

Talking Points:

  • Norges Banks holds interest rates steady at 1.5%
  • Drops in USOil below $75 could accelerate krone weakness
  • USDNOK reached upper end of channel; look for a continuum of prices as they consolidate

Expressing their intent to maintain the current key policy rate through 2015, Norges Bank held October’s interest rate steady at 1.5%. The MPC considerers the present Norwegian economic outlook to be consistent with September’s forecast. Optimistic economic indicators in Norway have counterbalanced the growing uncertainty abroad.

Favorable Core CPI and unemployment readings provide some assurance in an otherwise unpredictable external market susceptible to deflationary pressures. While September’s CPI was underwhelming at 2.1%, core CPI, excluding energy, measured 2.4%—just below the targeted 2.5%. Compared to September of 2013, the number of employed persons increased last month by 101,000, complementing an improved unemployment rate of 7.2% and lending credence to current monetary policy.

In contrast assurances in peripheral markets remain at bay. Uneven growth amongst trading partners and down-trending USOil prices may undermine the NOK. While there is a strong level of technical support just below current prices near $75, a break below $75 could really start to accelerate weakness on the NOK driving USDNOK and EURNOK above their shooting star highs.

Under current USOil prices the USDNOK has met the upper end of its channel so gains are likely to be capped for now. The daily chart also shows a shooting star candlestick pattern at the upper trend channel on Oct 16 which is a bearish signal. Look for sideways chop and possibly some drift lower towards 6.30 in USDNOK to consolidate the recent move higher.

USD/NOK Daily Chart

dailyfx usdnok daily chart.

Chart Created By Jeremy Wagner Using MarketScope2.0

Likewise, the EURNOK has a bearish shooting star candlestick pattern on Oct 16 too. Consolidation towards 8.30 is likely with 8.20 and 8.55 being more significant levels to determine trend.

EUR/NOK Daily Chart

dailyfx eurnok daily chart.

Chart Created By Jeremy Wagner Using MarketScope2.0

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