- EUR / NOK rises to new yearly highs beyond 10.7000.
- NOK continues to be offered on risk aversion and falling oil.
- Norges Bank is expected to raise rates in September.
The Norwegian krone depreciates further and rises to EUR / NOK to new year highs in the region of 10,7000 on Tuesday.
EUR / NOK looks at oil, risk trends
EUR / NOK is advancing for yet another session due to persistent selling pressure hitting the Norwegian currency.
In fact, the ongoing selloff in crude prices dragged a barrel of European benchmark Brent crude to fresh 2-month lows in the $ 67.00 zone on Tuesday. Renewed downward pressure on raw materials follows the recent announcement by OPEC + to increase oil production.
Also weighing on the NOK is the currency’s low liquidity characteristic, which performs poorly in a context where risk aversion prevails.
The weak tone of the krone seems somewhat in contrast to the recent rally in the NIBOR (short-term interbank rate) from levels below 0.20% at the beginning of the month to the current 0.27%.
What to look for around NOK
The NOK is losing more ground and weakening to the lowest level since mid-December 2020. As usual, the price action around the krone is expected to follow the dynamics of Brent and messages from Norges Bank. That, coupled with a faster economic recovery, the firm launch of vaccines and the prospects for a solid rebound in global activity are helping the vision of a stronger currency in the medium term. It’s worth remembering that Norges Bank is expected to be one of the first central banks to raise rates in the DM space, probably in September.
At time of writing, the cross is up 1.10% to 10.6769 and is facing next resistance at 10.7799 (monthly high on Dec 7, 2020) seconded by 11.0000 (round level) and then 11.2113 (monthly high of 30 October 2020). On the other hand, a breakout of 10.3402 (200-day SMA) would open the door to 10.1991 (50-day SMA) and finally 10.1381 (July 6 monthly low).