The USD/NOK pair fell today as traders responded to the recent Covid 19 measures in Norway.
The government will restrict public gatherings and quarantine new arrivals.
The higher crude oil price has also boosted the Norwegian krone.
The USD/NOK pair fell to its lowest level since October 14, when traders responded to the rising number of Covid-19 cases in Europe. The pair is also reacting to the overall higher crude oil prices. It is trading at 9.1856, down from last week’s low of 9.300.
USD/NOK falls to a two-week low
Norway adds measures to limit the spread of Covid
Most European countries have reported a higher number of Covid-19 cases in recent days. This increase has raised fears among many people that the region will experience a double-dip recession this year.
Norway has also reported more cases of coronavirus. The country has so far confirmed more than 18,000 cases and more than 279 deaths. These figures are much lower than those of neighbouring Sweden, which has reported more than 110,000 cases and more than 5,000 deaths.
In a statement yesterday, the Norwegian government presented some measures to prevent the spread of the disease. The government will limit public gatherings in closed rooms to 50 people. It will also reduce the number of guests that can be invited at home to only 5 people.
Most importantly, the Norwegian government has stated that it will introduce quarantine measures. Members of EU countries with increasing numbers of cases will have to be quarantined for 10 days. Before the new rules, people did not have to be quarantined, but they had to undergo tests before leaving their country. In addition, the government will make the wearing of masks in public compulsory.
These measures entail considerable risks for the economy. Due to the new quarantine measures, it will take some time for the tourism industry, for example, to recover. Other sectors such as the hotel and restaurant industry, retail trade and the manufacturing industry will also be affected if the new restrictions remain in place. This will lead to a contraction in the fourth quarter, as the country is likely to expand in the third quarter. Previously it had contracted by 6.3% in the second quarter and by 2.2% in the first quarter.
The rising cases also put Norges Bank on the defensive as it prepares for its meeting next week. At the previous meeting, the bank hinted at a future rate hike. Regardless, the USD/NOK is reacting to relatively higher crude oil prices, with Brent and West Texas Intermediate (WTI) rising nearly 1% today.
USD/NOK technical outlook
USD/NOK technical table
The four-hour chart shows that the USD/NOK has been bearish since its high of 9.4120 on October 16th. The price is slightly above the 50% Fibonacci retracement level. It is also relatively lower than the 15-day and 25-day exponential moving averages. It is also noteworthy that it has also formed a head and shoulder pattern, with the cutout at 9.20. Therefore, the price is likely to continue to fall as bears look for the next support at 9.1190.