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Chart of the day: USDNOK

The pair has rallied strongly since the beginning of 2020 and is now sitting just shy of an all-time high of 9.3053, with Brent crude plunging over the same period to 53.19, the lowest level since early January 2019.

The Krone is greatly influenced by Brent oil, the main benchmark price for petroleum production in Europe, Africa, and the Middle East. As the spreading coronavirus continues to worsen global oil demand, Brent suffered a 20% YTD decline, sending USDNOK to the sky.

USDNOK daily chart

With fading virus concern and higher-than-expected Norweigan inflation, which beat consensus by 60bp at 1.8%, the pair failed to break above the double-top resistance. The divergence between price and the RSI, best seen on the daily chart suggests a heightened possibility of a trend reversal, as momentum is exhausted. The immediate support is seen at 9.2000.

The Norges Bank Governor is due to deliver his annual speech on 13 February addressing "Economic perspectives”, where we will have more information about its economic forecast and monetary policy. With the market pricing just 6bp of cuts over the coming 12 months, it seems the prospects for a bullish breakout or a deeper correction will be best explained by moves in the USD, or in the Brent price.

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