Norwegian Krone Jumps as US Dollar Weakens Ahead of US CPI. Will EUR/NOK Break Lower?

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Norwegian Krone, EUR/NOK, Crude Oil, US Dollar, AUD/USD, China – Talking Points

  • The Norwegian Krone was the best of the commodity currencies today
  • APAC equities were mixed after directionless US session ahead of US CPI
  • Energy markets pause but hold high levels. Will oil push NOK higher?

The Norwegian Krone outperformed all G-10 currencies today as oil prices continue to underpin it. The US Dollar was weaker, but the Australian Dollar under-performed everyone.

Energy markets took a breather today from their meteoric rises, as nicer weather alleviated the pressure in US gas prices. The International Energy Agency warned that the world is not investing enough in energy production to meet future needs.

WTI crude oil held above US$ 80 a barrel as fuel substitution continues to see all energy markets supported. The high oil prices are helping to push EUR/NOK to lows not seen since before the pandemic last year.

APAC equities were quiet today after not much action from Wall Street. Hong Kong stock markets were closed due an approaching typhoon. Trade data for China was strong with exports up 20% year/year through to the end of September.

China state media warned of a weakening property market with the Evergrande saga not likely to go away anytime soon. Some US Dollar junk bond yields are at their highest in 10 years.

The World Bank warned of persistent inflation as Senior Vice President Carmen Reinhart commented that the recent spike in inflation might be persistent, due to multiple supply shocks. Meanwhile, US Treasury Secretary Janet Yellen maintained the transitory mantra for inflation in an interview.

Federal Reserve Bank of Atlanta President Raphael Bostic called “transitory” a dirty word – he even had a ‘swear jar’ next to him as he spoke! Federal Reserve Vice Chair Richard Clarida said that he doesn’t see stagflation in the medium term.

In any case, the market is pricing US 2-year inflation at 2.75% according to the break-evens, using the Treasury Inflation Protection Securities (TIPS) calculation.

Apple announced they will reduce production of the iPhone 13 as chip shortages continue to impact output, highlighting the real-world issues posed by supply chain constraints.

Ahead, market attention will be on the all-important US CPI number due today.

EUR/NOK Technical Analysis

EUR/NOK moved outside the lower band of the 21-day simple moving average (SMA) based Bolling Band last week. A move back inside the band can be bullish, however the price action only moved sideways continues to press near fresh lows.

EUR/NOK continues to trade in a descending trend channel. Support could be provided at the early 2020 low of 9.7959. Initial resistance might be offered at the intersection of a descending trend line, currently at 10.100, or at the recent high of 10.2312

Chart created in TradingView

— Written by Daniel McCarthy, Strategist for DailyFX.com

To contact Daniel, use the comments section below or @DanMcCathyFX on Twitter





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