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In Friday's trading session, the USD/NOK pair is trading at a level of 10.53, registering a modest gain of 0.32%. The US Dollar (USD) is showing a stable performance in light of Federal Reserve (Fed) officials adopting a cautious stance in light of a strong US economy. As a reaction, the probability of a rate cut in March and May by the Fed appears to be low according to the market’s expectations.
On the other hand, the short term of the NOK will be dictated on whether the Norges Bank will follow the Fed’s stance to delay cuts which will be guided by local data. In addition, the Norwegian currency gained momentum in 2024, due to rising Oil prices, as it is an important global producer, so in case, the black gold advances further the pair’s upside may be limited.
On the daily chart, the Relative Strength Index (RSI) for the USD/NOK is currently in positive territory. The upward slope indicates that buyers are beginning to assert control as the RSI readings moved from negative to positive region recently.
Comparatively, the RSI on the hourly chart shows similar signs of buyer dominance as the readings fall within the positive territory. This reaffirms the presence of the buying sentiment in both short and long-term perspective. Nonetheless, this perspective is somewhat dampened by the Moving Average Convergence Divergence (MACD). The MACD shows red bars in the hourly and daily chart, indicating negative momentum despite being flat. This indicates the presence of sellers in the market, putting a halt to the buying pressure as reflected by the RSI.
In the broader context, the pair is below its 20, 100, and 200-day Simple Moving Averages (SMAs) which is indicative of a controlled bear market. However, the underlined strengthening buyer dominance seen from the RSI might provide a reversal in trend if it maintains its consistency.
In Wednesday's session, the USD/NOK has been seen trading at 10.60 following a 0.73% slide downwards. This movement comes after a slight consolidation of the USD post-Consumer Price Index (CPI) gains and a robust performance by the NOK, driven by firm Q4 Gross Domestic Product (GDP) data.
To add to that, the Federal Reserve’s (Fed) rate cut remains unlikely in the short-term, with the January US CPI running hot with headline and core readings beating expectations. The data indicates a solid economic condition, minimizing the chances of Fed easing. A notably worrying fact for the Federal Reserve is a rise in super core by 4.3% YoY from 3.9% in December, showcasing that inflationary pressure persists. Regardless, the odds for a rate cut in March linger around 10% and increase to a full expectation by June, which may limit the downside for the pair.
For Norway, mainland GDP grew by 0.2% in Q4 against Q3's 0.1%, propelled by consumer spending and net exports. The positive statistics are in line with Norges Bank's projections, affirming that they will likely maintain the policy rate at 4.5% for now. However, the swaps market forecasts a 50% chance of a rate cut in the next six months and if the Norwegian bank decides to delay cuts later than its American peer, the pair could see further downside.
On the daily chart, the Relative Strength Index (RSI), it appears that the USDNOK pair has been fluctuating in the neutral zone, indicating a market with neither sellers nor buyers gaining control. Similarly, the Moving Average Convergence Divergence (MACD) histogram, although green, suggests a loss of bullish momentum as its bars have been decreasing in height recently.
When taking into account the pair’s relation to the Simple Moving Averages, a bearish control is seen on a larger scale, as the pair is below the 100 and 200-day SMAs. However, considering the pair remains above the 20-day SMA, the bearish forces appear to lack enough strength in the short term.
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