USD/NOK forms inverted head and shoulders after Norway’s CPI data

The USD/NOK declined slightly today after the relatively weak Norwegian inflation numbers and higher crude oil prices. It is trading at 8.2182, which is slightly above the intraday low of 8.1915. 

Norway inflation and higher oil prices

Consumer prices in Norway disappointed in April as the country’s economic recovery continued. According to Statistics Norway, the headline consumer price index (CPI) rose from -0.3% in March to 0.3% in April. This increase was slightly below the median estimate of 0.5%. 

The prices rose by 3.0% on a year-on-year basis, a decline from the previous 3.1%. This performance was mostly because of food and alcoholic and nonalcoholic beverage prices. They were partially offset by transport and furnishing prices. 

Meanwhile, the core consumer price index that excludes the volatile food and energy prices, rose by 2.0% after rising by 2.7% in the previous month. Further, the producer price index rose from 18.4% to 22.5%. 

These numbers came a week after Norges Bank delivered its interest rate decision. The bank left interest rates unchanged and hinted at a possible rate hike in the next half of the year. 

The USD/NOK pair is also struggling because of the weaker US dollar. The dollar index has continued to drop after the disappointing US non-farm payrolls data. The data showed that the economy created fewer jobs in April than analysts were expecting. The Labour Department also revised the spectacular March payrolls lower. Worse, the unemployment rate rose to 6.1%. 

Further, crude oil prices and other commodities have continued to rise. The price of Brent rose to $68.33 while the West Texas Intermediate (WTI) price rose to $65.40.

The pair will react to the latest US inflation numbers on Wednesday and speeches by several Fed members on Tuesday. It will also react to the latest US retail sales and Norwegian GDP data.

USD/NOK technical outlook

The three-hour chart shows that the USD/NOK has been in a steep downward trend since Friday last week. As a result, the price is at the lower line of the Bollinger Bands. It is also slightly below the short and longer-term moving averages. Most notably, it has formed an inverted cup and handle pattern that is usually a bullish sign. Therefore, there is a possibility that it will rebound later this week. Nonetheless, a move below 8.1300 will invalidate this prediction. In a note, analysts at ING said:

“However, this – CPI – looks unlikely to alter Norges Bank’s position of being the first G10 central bank to hike rates later this year and USD/NOK should be in a position to retest the low of the year at 8.15 shortly.”