- The latest statement signals a more assertive stance from Fed officials, which could dampen expectations for rate cuts.
- Weak economic indicators from Germany and the euro area economy could fuel bearish views on NOK.
The USD/NOK pair is currently trading 0.60% higher on Tuesday, despite market broad expectations that US monetary policy will be eased. The recovery was accelerated by an aggressive approach from Federal Reserve officials earlier in the week. Meanwhile, the Norwegian krone (NOK) faces uncertainty as key economic indicators in Europe decline and the possibility of an interest rate cut by the European Central Bank (ECB) increases.
The stance of monetary policy, particularly the more aggressive stance of Federal Reserve officials, appears to be the main driver of the recent strength in the US dollar. The notion of imminent Fed monetary policy easing was challenged, with many Fed officials echoing Powell's tone and promoting a hawkish bias to limit the dollar's downside.
Meanwhile, in the euro area, expectations are high for the ECB's planned interest rate cut in June. Additionally, recent data shows weak March factory orders from Germany, and weakness in eurozone countries increases the likelihood of a bearish scenario for the Norwegian krone.
USD/NOK technical analysis
Based on the indicators on the daily chart, the Relative Strength Index (RSI) reveals a negative trend for USD/NOK. Although the latest RSI numbers are in negative territory, they show a slight recovery from the previous time. This suggests that sellers currently control the market, but bulls are putting up a fight. Additionally, the Moving Average Convergence Divergence (MACD) has produced a flat red bar, indicating negative momentum and confirming that sellers have the upper hand at the moment. However, a limited upward shift in the daily RSI could indicate potential volatility or a slight decline.
USD/NOK daily chart
From a broader perspective, the USD/NOK pair is above its 100-day and 200-day simple moving averages (SMAs), showing signs of bullish momentum. This positioning indicates continued bullish dominance that traders should consider. However, the bears are in the hands of the bears in the short term as they have broken below the 20-day SMA.
