USD/NOK forms a double-top as Norway inflation slips again

on Sep 11, 2023
  • The USD to Norwegian krona slipped slightly on Monday.
  • The headline and core Norwegian inflation dropped in August.
  • Inflation dropped from 0.4% in July to -0.8% in August.

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The USD/NOK exchange rate retreated slightly after the latest Norwegian consumer and producer inflation data. The pair retreated to a low of 10.61, the lowest level since September 1 as investors repositioned to the upcoming US inflation data.

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Norway inflation slipped in August

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The USD/NOK pair retreated after the latest Norwegian inflation numbers. According to the statistics agency, the headline consumer price index (CPI) dropped from 0.4% in July to -0.8% in August. This decline was steeper than the median estimate of -0.4%. It translated to a YoY drop of 4.8%, the lowest level since March 2022.

Norway’s core consumer inflation continued dropping as well. It retreated from 6.4% to 6.3%, lower than the median estimate of 6.6%. At the same time, the core consumer price index dropped by 37.4%.

Norway’s inflation remains significantly above the bank’s 2% target. Therefore, analysts expect the Norges Bank will deliver another 0.25% rate hike in its meeting this month. It hiked by 0.25% in its August meeting to 4%.

The next key catalyst for the USD/NOK pair will be the upcoming US consumer inflation and retail sales numbers. Economists expect the headline CPI rose from 3.2% in July to 3.4% in August.

Core inflation, which excludes the volatile food and energy products, is expected to come in at 4.2%, down from the previous 4.6%. If these estimates are accurate, there is a likelihood that the Fed will maintain a hawkish tone.

These numbers will come a few days after several Fed officials hinted that the bank will pause its rate hikes in September. Laura Logan and Christopher Waller, have pointed to a pause in the September meeting.

USD/NOK forecast

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The 4H chart shows that the USD to NOK exchange rate found a strong resistance at 10.75 on August 28th and September 5th. In price action analysis, this pattern is one of the most bearish ones in the market.

The pair has moved slightly below the 25-period and 50-period exponential moving averages (EMA). Also, the two lines of the MACD indicator have moved below the neutral point.

Therefore, the outlook for this pair is bearish, with the next level to watch being at 10.51, the lowest level on August 30th. This price is also the neckline of the double-top pattern.


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