- The USD/NOK price dropped sharply today after the Norges Bank interest rate decision.
- The bank left interest rate unchanged as most analysts were expecting.
- It is also falling because of the overall weaker US dollar.
The USD/NOK pair is down by more than 0.80% as traders react to the US election and the interest rate decision by Norges Bank. It is trading at 9.2500, which is the lowest it has been since October 28.
Norges Bank interest rate decision
The Norwegian central bank concluded its two-day monetary policy meeting today and decided to leave interest rate unchanged at 0.0%. That was in line with what most analysts polled by Reuters were expecting.
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It was also in line with the bank’s monetary policy report that it published in September. In this statement, the bank hinted that interest rates would remain at the current level for a few more years.
In the statement, the committee said that the country’s economy was in a period of deep contraction caused by the Covid pandemic. Indeed, the number of cases has spiked recently. Yesterday, the country confirmed more than 1,000 cases, which is a record. That brought the total number of cases to more than 22,000 and deaths to more than 282. As a result, the government has tightened rules to slow the spread.
However, the bank noted that the economy had started to improve. It cited the housing market where prices have continued to rise. Inflation has fallen but is also above its previous target. But it hinted that prices will remain low because of a higher unemployment rate. The statement said:
“Underlying inflation has fallen, but is still higher than the inflation target. The effects of the krone depreciation earlier in 2020 are gradually fading. Together with prospects for low wage growth, this suggests that underlying inflation will moderate in the coming years.”
The USD/NOK is also falling because of the ongoing vote counting in the United States. As of this writing, Joe Biden is leading in the popular vote and in the electoral college. As such, there is a higher probability that he will win the election, which is a negative for the dollar.
Also, the dollar is falling ahead of the Federal Reserve interest rate decision that will come out at 19:00 GMT. Like the Norges Bank, investors are pricing-in no rate cut by the bank and a relatively dovish tone.
USD/NOK technical outlook
On the four-hour chart, we see that the USD/NOK pair has been in a sharp downward trend this month after it found strong resistance at 9.6038. The price has since then moved below the 38.2% Fibonacci retracement level. It is also below the 50-day and 25-day exponential moving averages. Therefore, it seems like bears are in total control, which means that they will next target the support at 9.1222.