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Crude Oil Prices, US Dollar-NOK Brace for Norges Bank After FOMC

Crude Oil Prices, US Dollar-NOK Brace for Norges Bank After FOMC

Dimitri Zabelin, Analyst

FOMC, Crude Oil Prices, US Dollar –TALKING POINTS

  • Norwegian Krone may rise on Norges Bank (NB) rate decision after FOMC
  • NB remains one of the last hawks in the world of central banks – will it last?
  • Crude oil prices resume dominant downtrend as supply fears begin to cool

Learn how to use political-risk analysis in your trading strategy!

USD/NOK may fall if the Norges Bank raises interest rates for a third time this year and/or hints that it still intends to pursue its tightening cycle. It has been dubbed the “last hawk” in the world of central banks as its peers cut rates in the face of slower global growth. Politically-induced supply disruption fears in the Middle East have helped buoy the oil-linked Krone, though their potency may ware off in the face of eroding demand.

Norges Bank Rate Decision: What to Expect?

Analysts are estimating for the Norges Bank to hold the benchmark interest rate at 1.25 percent. However, it is possible monetary authorities may take advantage of the high crude oil prices and temporary thawing in trade tensions to squeeze in a third hike this year. Looking at implied policy rates between the August rate decision and now as compared to July to August shows there’s been a hawkish shift in market expectations.

Chart showing Implied policy rate for norges bank

Source: Bloomberg

Crude Oil Prices, US Dollar-NOK Brace for Norges Bank After FOMC

Supply disruption fears as a result of political tensions in the Middle East – be it from Iran’s nuclear program or their alleged involvement in the Saudi Aramco drone strike – have helped buoy crude oil prices. Norway’s petroleum-based economy and the Norwegian Krone have benefited from this as eroding fundamentals chip away at world demand for crude oil.

Will Norges Bank Take Advantage of High Crude Oil Prices, Raise Rates for a Third Time?

Chart showing USD/NOK

Crude oil prices chart created using TradingView

USD/NOK Technical Analysis

USD/NOK could once again break below the multi-month rising support channel and cause the pair to deviate from their dominant uptrend (red parallel channel). The pair has already broken through a two-month ascending support zone (yellow parallel lines) and has led to the it puncturing a familiar support zone. Traders may wait to commit capital until after the Norges Bank rate decision and outlook.

USD/NOK – Daily Chart

Chart showing USD/NOK

USD/NOK chart created using TradingView

CRUDE OIL 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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