USD/NOK could soon rise despite the hawkish Norges Bank decision

The USD/NOK was little changed on Thursday even after a relatively hawkish Norges Bank interest rate decision. It is trading at 8.3372, where it has been in the past few days. 

Norges Bank rate decision

The Norwegian economy is having a faster economic recovery than most analysts were expecting. This recovery has been helped by the government stimulus package, which was facilitated by the giant sovereign wealth fund. The country also handled the coronavirus relatively well while the price of crude oil has also fueled the recovery. 

It is against this backdrop that the Norges Bank delivered its interest rate decision today. As expected, the bank left its main interest rate unchanged at 0.10% and maintained that a rate hike will come in the latter part of the year. In a statement, Governor Oystein Olsen said:

“In the committee’s current assessment of the outlook and balance of risks, the policy rate will most likely be raised in the latter half of 2021.”

If the bank hikes, it will become the first to do so among other major economies. This is notable because the bank was considering pushing interest rates to the negative zone in 2020. Also, Norway has the lowest real interest rates in the developed world. This rate is calculated by subtracting interest rates and inflation.

Therefore, the USD/NOK pair wavered since the bank did not change its policy. Its statement was already known since it has repeated the claim several times before. In a note, analysts at Bloomberg said:

“We expect a rebound in growth in 2Q will allow the central bank to liftoff in December and hike twice in 2022. The key rate should reach 1.5% by the end of 2024.”

Looking ahead, the USD/NOK pair will react to the upcoming employment numbers from the United States. They are important since they will have a role to play in the next Fed interest rates decision. If the economy continues to add hundreds of thousands of jobs, the bank will be under pressure to hike.

USD/NOK technical forecast

The four-hour chart shows that the USD/NOK has been in a tight range recently. That has seen it form a bullish flag pattern that is shown in black. The pair is slightly below the 61.8% Fibonacci retracement level. It has also formed what looks like an inverted head and shoulders pattern, which is a bullish sign. Therefore, the pair will likely continue rising as bulls target the 38.2% retracement level at 8.4145, which is 1.75% above the current level.