- The USD/NOK pair declined today as traders reacted to the latest Covid-19 measures in Norway.
- The government will limit public gatherings and start quarantining new arrivals.
- Higher crude oil price has also boosted the Norwegian krone.
The USD/NOK pair declined to the lowest level since October 14 as traders reacted to the rising number of Covid-19 cases in Europe. The pair is also reacting to the overall higher crude oil prices. It is trading at 9.1856, which is below last week’s low of 9.300.
Norway adds measures to limit Covid spread
Most European countries have reported higher number of Covid-19 cases in the past few days. This increase has led many people to fear that the region will go through a double recession this year.
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Norway, too, has reported more coronavirus cases. The country has so far confirmed more than 18,000 cases and more than 279 deaths. These numbers are substantially lower than those of neighbouring Sweden, which has reported more than 110k cases and more than 5,000 deaths.
In a statement yesterday, the Norwegian government unveiled some measures to prevent the disease from spreading. The government will limit indoor public gatherings to 50 people. It will also reduce the number of guests that people can invite at home to just 5.
Most importantly, the Norwegian government said that it will implement quarantine measures. Members of the EU countries with rising number of cases will have to quarantine for 10 days. Before the new rules, people did not have to quarantine, but they needed to take tests before leaving their countries. Also, the government will make wearing masks in public mandatory.
These measures pose significant risks to the economy. For example, because of the new quarantine measures, the tourism industry will take time to recover. Similarly, other industries like hospitality, retail, and manufacturing will be affected if the new restrictions continue. This will lead to a fourth-quarter contraction since the country likely expanded in Q3. Previously, it contracted by 6.3% in Q2 and by 2.2% in Q1.
The rising cases also put the Norges Bank in the defensive as it prepares its meeting next week. In the previous meeting, the bank hinted at a future interest rate hike. Separately, the USD/NOK is reacting to the relatively higher crude oil prices, with Brent and West Texas Intermediate (WTI) rising by almost 1% today.
USD/NOK technical outlook
The four-hour chart shows that the USD/NOK has been falling since reaching a high of 9.4120 on October 16. The price is slightly above the 50% Fibonacci retracement level. It is also relatively lower than the 15-day and 25-day exponential moving averages. Notably, it has also formed a head and shoulders pattern, with the neckline at 9.20. Therefore, the price is likely to continue falling as bears aim for the next support at 9.1190.