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USDNOK's Recovery May be Threatened by Dovish FOMC Commentary

USDNOK's Recovery May be Threatened by Dovish FOMC Commentary

2019-06-18 05:00:00
Dimitri Zabelin, Analyst
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NORDIC FX, NOK, SEK WEEKLY OUTLOOK

  • USDNOK broke through critical resistance – now what?
  • The pair now has its eye on the upcoming Fed decision
  • USDSEK is cautiously approaching a familiar ceiling

See our free guide to learn how to use economic news in your trading strategy!

NORWEGIAN KRONE-US DOLLAR TECHNICAL ANALYSIS

After briefly breaking below the congestive range between 8.6937-8.7883 (yellow lines), USDNOK has since recovered and is now aiming to break above the upper lip. The pair may experience some inter-range resistance with the upper crust of the rising support channel (red parallel lines). The dominant uptrend will likely continue if fundamental factors continue to support the demand for liquidity and haven over chasing yields.

USDNOK Comes Close to Breaking Below Critical Support – Daily Chart

Chart Showing USDNOK

Dovish commentary from Fed Chairman Jerome Powell could send USDNOK lower if capital flees the US Dollar. Conversely, if underlying dovish commentary is characterized as a pessimistic outlook for growth, it could induce risk aversion and actually send USDNOK higher. The Greenback’s unparalleled liquidity acts as a haven for investors seeking to preserve capital in a turbulent environment.

Normally, a fundamentally-themed analysis would not be included in a weekly technical article, but the sheer magnitude and implications of this week’s FOMC meeting simply cannot be ignored because of how it may impact the technical trajectory. If you want to learn more about what other fundamental factors will be driving the Norwegian Krone this week, check out my weekly forecast.

Zooming out to a monthly chart shows USDNOK continuing to confidently climb along the 14-month rising support (red parallel channels). The attempts at breaching below the lower level has had two possible effects. The first is that the failed attempts have made it a formidable barrier to break given the previous failures. The second is that it has become a familiar floor that traders may be more comfortable at trying to breach again.

USDNOK Support Has Held So Far… Will it Continue?

Chart Showing USDNOK

Only time will tell. To receive updates on USDNOK price movements, be sure to follow me on Twitter @ZabelinDimitri.

SWEDISH KRONA-US DOLLAR TECHNICAL OUTLOOK

Much like in last week’s technical outlook, USDSEK is still aiming to re-enter the 9.5323-9.5767 resistance range (red dotted lines). The pair has shown a pattern of breaking a new high, retreating, moving sideways for a while and then resuming the dominant uptrend.

USDSEK Aims for Critical Resistance

Chart Showing USDSEK

A wider perspective reveals that the USDSEK is still strongly climbing along – and frequently above – an 18-month rising support channel (blue parallel lines). This uptrend will likely continue at least throughout the end of 2019. However, if the pair come close to rising support, that could sound the alarm for traders going long USDSEK. A short or long-term reversal could be brewing if this occurs.

USDSEK Continues Along Rising Support

Chart Showing USDSEK

SWEDISH KRONA, 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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