USD/NOK: 3 reasons why the Norwegian krone is surging
- The USD/NOK pair is trading near the lowest level this year as Norway's economy reopens.
- The Norwegian unemployment rate rose to 4.6% in June while industrial production fell.
- The pair is targeting moves below 9.000 as Norway continues to reopen.
The USD/NOK pair is down by 0.2% as investors react to the overall weaker dollar and unemployment rate numbers from Norway. The pair is trading at 9.1425, which is its lowest level since January 27 this year.
Norwegian krone in high spirits
The Norwegian krone has been in an upward trend in the past few months. The USD/NOK has declined by more than 15% in the past three months, making krone the best-performing currency in the developed world. The Swedish krona has gained by 12% while the Australian dollar has gained ~11%. The euro has gained by ~6%.
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The krone has gained because of three key reasons. First, the country has been relatively successful in managing the pandemic. According to Worldometer, the country of more than 5 million residents has had less than 10,000 infections and 255 deaths.
Second, higher crude oil prices have helped support the economy. As a leading exporter, the country benefits when the prices of oil are rising. In the past three months, Brent and West Texas Intermediate (WTI) crude have gained by 100% and 55%, respectively.
Third, the Norwegian Central Bank has sounded a bit hawkish. In its recent decision, the bank signalled that it was thinking of raising interest rates either later this year or early next year. This made it the first major central bank to talk about tightening.
In addition, the Norwegian government response to the pandemic has been welcomed. The government has announced a stimulus package worth billions of dollars. It has also slashed taxes and provided more support to companies. Further, the recently-passed EU recovery fundhas provided an indirect stimulus considering that the country does most of its business in Europe.
Norway unemployment rate rises
Like all countries, Norway’s economy has been affected by the coronavirus pandemic. Analysts expect that the economy will have its first recession since 2008. However, because of its wealth, the country will not be as affected as other countries in Europe, Asia, and Americas.
According to Statistics Norway, the unemployment rate jumped to 4.6% in June from the previous 4.2%. This happened as the number of unemployed people increased to 131,000 while those employed fell to 2.69 million. This brought the participation rate to 66.8%, which is still an impressive number.
While a jump in unemployment is a bad thing, it is actually better compared to its peers. For example, the unemployment rate in the Eurozone is about 7.8% while that in Sweden is almost 10%. In the United States, the unemployment rateis above 12%.
Another data released today showed that industrial confidence dropped to -10.1 from the previous -17.4 in the second quarter.
USD/NOK technical forecast
On the daily chart, the USD/NOK is trading at 9.1292, which is close to its lowest level since January. The pair is below the 78.2% Fibonacci retracement level. It is also below the 50-day and 100-day Exponential Moving Averages (EMAs). This means that the price is likely to continue falling as the US dollar continues to weaken. Therefore, bears are likely to target moves below the important support at 9.00.