Major Breakout In USD/NOK Exposes Multi-Year Lows

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The US Dollar (USD) fell broadly against the Norwegian Krone (NOK), dragging the USD/NOK to 5.9156 after dovish FOMC minutes and Norway’s inflation report. The pair has exposed multi-year lows after breaking the long-term channel support.

Technical Analysis

As of this writing, the pair is being traded around 5.9146. Hurdle may be seen near 6.0500 that is the channel resistance of the rising wedge formation as demonstrated in the following chart. A break and daily close above the trendline resistance could push the pair again into the bullish zone, exposing the 6.100 handle.

On the downside, the pair is likely to find support near 5.7327 that is the low of September 09 ahead of 5.4226, the low of February 01, 2013. A break below 5.4226 will open doors for stronger correction towards the 2008 lows.

Norway Inflation

On Thursday, April 10, Statistics Norway released the Consumer Price Index (CPI) report for the month of March. Analysts had predicted a slight increase by 2.14% in March compared with 2.10% in the same month of the year before, but the actual outcome came worse than expectations with a decline to 2.0%. USD/NOK accelerated the downside movement despite downbeat Norway inflation which shows some real weakness in the price action.

Balance of Trade

On Wednesday, April 16, Statistics Norway will release the Balance of Trade report for the previous month. According to median projection of different economists, the trade surplus jumped to NOK 35.3 billion in March as compared to NOK 33.1 billion in the month before, better than expected actual outcome will be seen as bearish for USD/NOK and vice versa.

Retail Sales

On Wednesday, April 30, Statistics Norway is due to release the retail sales data for the previous month. The sales surged by 2.85% last month as compared to 0.4% in the same duration of the year before, the median projection of analysts says. The same day, consumer confidence report for the first quarter is also scheduled for release. According to average forecast of economists, the confidence of consumers rose slightly by 8.21% in the first four months of the ongoing year as compared to 8% in the quarter before. Below than expected retail sales and consumer confidence reports will be seen as bullish for USD/NOK and vice versa.

FOMC Minutes

The Federal Reserve released the minutes from the Federal Open Market Committee (FOMC) on April 09. The minutes showed dovish remarks from the FOMC policymakers regarding the first rate hike which consequently spurred bearish momentum in the dollar.

Conclusion

The recent breakout in USD/NOK has exposed fresh multi-year lows. The pair might test the 2008 support area in the long run amid better than expected growth in Norway.

To contact the writer of this story: Usman Ahmed at usman@forexminute.com