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Norwegian Krone Plunges vs US Dollar, Euro on Covid-19 Outbreak

Norwegian Krone Plunges vs US Dollar, Euro on Covid-19 Outbreak

Dimitri Zabelin, Analyst

Norwegian Krone, Euro, US Dollar, EUR/NOK, USD/NOK – TALKING POINTS

  • Norwegian Krone worst-performing G10 currency amid OPEC price war, coronavirus
  • USD/NOK continues to surge beyond its 1985 high amid a high demand for US Dollars
  • EUR/NOK continues to rise after it re-mounting a multi-month inflection channel

USD/NOK TECHNICAL ANALYSIS

On March 18, USD/NOK clocked in its biggest one-day gain on record and rose over 7.60 percent as it continues to trade above 1985 highs. Resistance may be forming around 11.2717 as the pair trades just on the cusp of a potentially new ceiling. Looking at recent wicks supports the notion that a small pullback may be in the if prices ultimately fail to close above 11.2717.

USD/NOK – Daily Chart

Chasrt showing USD/NOK

USD/NOK chart created using TradingView

A monthly chart puts USD/NOK price action into perspective, with the pair up over 19 percent just in March. Two factors have been driving this price dynamic. The first is the selloff in crude oil and growth-oriented assets like the Norwegian Krone, which is primarily used as a medium of exchange in a petroleum-based economy.

The second has to do with increased demand for liquidity, and in this regard, the US Dollar reigns supreme as the world’s reserve currency. Risk aversion from the panic-induced selloff in global equities pressured crude oil prices which were already under strain from the Saudi Arabia-Russia price war.

USD/NOK – Monthly Chart

Chart showing USD/NOK

USD/NOK chart created using TradingView

EUR/NOK FORECAST

A similar dynamic is being expressed in EUR/NOK. After breaking above the August 2019 inflection area – red parallel channel – the pair has risen approximately 15 percent. From a technical perspective, the pair is showing signs of a desire to climb higher – as demonstrated by the long wick – but ultimately lacking resolve. Consequently, this could mark the start of either a small pullback or a more gradual ascent.

EUR/NOK – Daily Chart

Chart showing EUR/NOK

EUR/NOK chart created using TradingView

Much like with USD/NOK, EUR/NOK price action this month illustrates the decline of the Norwegian Krone as part of a broader market-wide selloff. Furthermore, the interest rates differential between NOK and EUR leaves considerably more room for the former to adjust downward than the other way around. Looking ahead, the selloff may be prolonged if Europe – the primary destination of Norway’s exports – continues to revise down its growth trajectory.

EUR/NOK – Monthly Chart

Chart showing EUR/NOK

EUR/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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