The Norwegian krone is in a strong bullish trend this month, helped by the ongoing dollar weakness. The USD/NOK pair plunged in the last six consecutive weeks and moved to its lowest level since January 2023. It is down by over 15% from the highest point this year.

Norges Central Bank interest rate cut

The USD/NOK exchange rate has been in a strong downtrend this year as the US dollar index plunged. This downtrend continued this week as the Norges Bank delivered it second interest rate of the year. 

The bank lowered rates for the second time this year, but insisted that it may go slow amid stubbornly high inflation. In a note, the central bank governor said:

“Incoming data since June indicate that there is a little less spare capacity in the economy, and that inflation may remain elevated for a little longer than projected. We will probably not reduce the policy rate ahead as quickly as envisaged.”

The most recent data showed that Norway’s inflation has continued rising in the past few months. It rose to 3.5% in August, the highest level since February this year. It has been in a slow uptrend after bottoming at 2.5% in April this year. 

Therefore, the USD/NOK exchange rate dropped because the interest rate cut was a hawkish one. As such, analysts now expect that the bank will not cut rates in December.

The USD/NOK exchange rate dropped after the Federal Reserve slashed interest rates for the first time this year. 

In a statement, the bank slashed rates by 25 basis points and hinted of more rates to come. Economists now expect that the bank will slash two more times this year and more in 2026. 

USD/NOK technical analysis

USDNOK chart | Source: TradingView

The weekly chart shows that the USD to NOK exchange rate has been in a strong downtrend in the past few months. It moved from a high of 11.52 in January to 9.8 today. 

The pair has moved below the lower side of the ascending channel that formed between 2022 and January this year. It has plunged below the 50-week and 200-week Exponential Moving Averages (EMA). The two lines are about to form a bearish crossover.

The USD/NOK pair has moved to the 50% Fibonacci Retracement level. It also dropped below the support at 9.8696, invalidating the double-bottom pattern. 

Therefore, the pair will likely continue falling as sellers target the 61.8% retracement level at 9.4335, down by 3.95% from the current level. 

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