EUR/NOK to find solid support at the 10.27 200-DMA – Nordea

The Norwegian krone moved largely sideways last week. Economists at Nordea remain cautiously positive when it comes to NOK, however, they do not see EUR/NOK and USD/NOK falling much lower in the short-term.

Norges Bank is for sure set to raise rates in September

“The disappointing job report means that the US central bank will likely delay any decision for reducing stimulus (tapering of QE) from September towards the end of this year. This reduces the short-term downside risks for NOK as Norges Bank’s rate hike in September will not be overshadowed by a hawkish Fed.”

“From a technical standpoint, there is limited downside in the short-term for EUR/NOK. The pair is trading just above its 200-day moving average (10.27) which is usually a solid support level. Next level to watch is the 100-day moving average around 10.24. For USD/NOK, the 200-day moving average stands at 8.56.”

“Risks for NOK are tilted to the downside: if something goes wrong the NOK will weaken but plenty need to be good for the NOK to strengthen. Any signals from the Fed in September for a faster-than-expected tapering of QE could be bad news for stock markets, giving rise to a weaker NOK as the krone is extremely sensitive to shifts in risk sentiment. On the other hand, the USD usually strengthens during periods of market turbulence”.

“A stronger USD usually has a negative effect on the oil price – something that could also have an adverse effect on the NOK.”