EUR/NOK climbs to 4-week highs beyond 10.6000

• EUR/NOK extends the advance to level above 10.6000.
• Lower crude oil prices weigh on the kroner so far.
• Norway’s Mainland GDP expanded 1.4% QoQ in Q2.

The Norwegian currency depreciates further and lifts EUR/NOK to fresh multi-week highs beyond the 10.60 yardstick on Thursday.

EUR/NOK higher on Brent prices, risk-off

EUR/NOK advances for the second session in a row to levels last seen in mid-July around 10.6000, as lower crude oil prices and the perseverant risk-off mood continues to hurt the risk complex.

In addition, low-liquidity currencies such as the NOK usually exaggerate the adverse reaction in a context of high volatility and risk aversion.

In fact, the recent moderate corrective downside in prices of the European reference Brent crude impacted negatively on the kroner, encouraging the cross to rebound from Monday’s 10.3500 region.

In the Norwegian docket, the Mainland GDP (excluding oil and foreign shipping) expanded 1.4% in the April-June period, returning to pre-pandemic levels (March 2020). Headline GDP expanded 1.1% inter-quarter during the same period.

On Thursday, the Norges Bank left the policy rate unchanged at 0.00%, as expected, although it reiterated that a rate hike is increasingly likely at the September meeting. The Scandinavian monetary authority noted the solid pace of the economic recovery backed by the vaccination campaign, adding that keeping low rates for a long period could spark financial imbalances.

What to look for around NOK

NOK loses further ground and debilitates to new 4-week lows. As usual, price action around the krone is expected to track Brent dynamics and messages from the Norges Bank. That, coupled with a faster economic recovery, the firm vaccine rollout and prospects of a solid rebound in the global activity are seen collaborating with the view of a stronger currency in the medium-term. It is worth recalling that the Norges Bank is predicted to be one of the first central banks to hike rates in the DM space, likely in September.

EUR/NOK significant levels

As of writing the cross is up 0.56% at 10.6126 and faces the next resistance at 10.7035 (2021 high Jul.20) followed by 10.7799 (monthly high Dec.7 2020) and then 11.2113 (monthly high Oct.30 2020). On the other hand, a breach of 10.3530 (monthly low Aug.16) would open the door to 10.286 (200-day SMA) and finally 10.2091 (100-day SMA).