Facts
- USDNOK returned today above the 10- and 30-day exponential moving averages (EMA10 and EMA30).
- The yield spread between US and Norwegian 10-year government bonds (US-NOR) has widened by approximately 8 basis points over the past month (today vs. June 26).
- The swap market is fully pricing in a September interest rate hike in the US.
Recommendation
- Position : Long (BUY) on USDNOK at market price
- Target Price (Take Profit; TP): 9.9000 (TP1), 10.0000 (TP2)
- Stop Loss (SL): 9.5450
Source: xStation5
Opinion
After breaking out to a 5-month high in late June, USDNOK entered a local downtrend driven by the resurgence of military actions in the Persian Gulf and rising oil prices. The ~4% correction ended on Monday, and the exchange rate is currently attempting to break out of this downtrend, aided by falling oil prices that are weakening the Norwegian krone. A rebound in USDNOK should be supported by the Federal Reserve’s increasingly hawkish stance. During the central banking forum in Sintra, Kevin Warsh explicitly identified inflation as enemy number one, emphasizing that the Fed will not tolerate inflation above target and suggesting it will not take AI-driven productivity gains for granted. A hawkish Fed is also backed by the recent series of US economic data (jobless claims at their lowest since 1969, a stable unemployment rate, and better-than-expected PMI readings indicating expansion in the private sector). The gathering economic momentum, accompanied by sticky inflation above 3%, is driving interest rate expectations across all time horizons (e.g., the year-end rate implied by the swap market rose from 4.00% to 4.05% over the past month). Expectations for Norges Bank are also hawkish (the swap market is pricing in a 25 bps hike by the end of the year), but they are gaining momentum more slowly than those for the US, as evidenced by the upward trend in the 10-year yield spread between the two economies. A renewal of upward pressure on oil prices could naturally strengthen the NOK; however, geopolitical risk simultaneously supports the dollar, which should limit any non-monetary-policy-driven declines in USDNOK.
Methodology
This recommendation was prepared based on a technical analysis of the USDNOK chart and a fundamental analysis of the respective economies (monetary policy in Norway and the United States). The directional bias was determined using moving averages and market expectations regarding central bank policies. Take Profit and Stop Loss levels were established using Fibonacci retracements and price action:
- TP1 is set at the recent peak.
- TP2 is set at the next key resistance level.
- SL is placed at the 61.8% Fibonacci retracement level of the April–May 2026 downward wave.
