USD/NOK forecast: bullish engulfing pattern points to a reversal
- The USD/NOK pair tilted higher after the weak American inflation data.
- The data showed that the American inflation eased in August.
- The pair also reacted to the latest Norwegian election and higher oil prices.
The USD/NOK price bounced back as investors reflected on the weak American inflation numbers, higher oil prices, and the latest Norwegian election. The pair rose to 8.6263, which was slightly higher than this week’s low of 8.5730.
Norwegian election and higher oil prices
The USD/NOK pair reacted mildly to Norways’ election, where the center-left opposition party won the election. The Labor Party will now start holding talks with other parties in a bid to fom a government. As a result, they will oust the conservative party that has been in power for the past two terms.
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Analysts expect that the new government will promote higher taxes for wealthy Norwegians. The party also pledged not to ban any oil exploration as other parties had suggested. Still, the impact of these policies to the overall Norwegian economy will likely be muted.
The Norwegian krone is also reacting to the relatively high crude oil prices. The price of Brent jumped to more than $74 while the West Texas Intermediate (WTI) rose to more than $70. This trend happened after two bullish reports by the OPEC and the International Energy Agency (IEA).
In a report published on Monday, OPEC predicted that oil demand will move above pre-pandemic levels in 2022. Precisely, the organization expects that oil demand will rise to 100.8 million barrels per day.
In a separate report, France-based IEA said that it expects demand to bounce back in the coming months after falling in the past three months. Oil prices have a mild impact on the Norwegian krone because the country is the biggest producer in Europe.
Meanwhile, the USD/NOK pair also rose after the latest American inflation data. Numbers by the Bureau of Labour Statistics showed that prices have started to moderate. The headline CPI declined from 5.4% in July to 5.3% in August.
USD/NOK technical analysis
The four-hour chart shows that the USD/NOK pair bounced back after falling to a multi-week low of 8.5728. On the four-hour chart, the pair managed to move above the key level at 8.6053, which was the lowest level on September 3rd. The pair also moved below the 25-day and 50-day exponential moving averages (EMA). Notably, it has formed a bullish engulfing pattern, which is usually a sign of a bullish reversal. Therefore, the USDNOK pair will likely keep rising as bulls target the upper side of the channel at 8.7353.
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