USD/NOK advances near 10.800 while investors gear for one more NB hike

• USD/NOK saw green on Friday, rising 0.50% above 10.788.
• Investors expect the NB to deliver a 25 basis point hike to 4.25% next week.
• The Fed decision will likely be a pause next Wednesday.

On the last day of the week, the USD/NOK gained additional traction, rising to multi-month highs above 10.788. 

On the NOK’s side, Norges Bank (NB) is anticipated to announce a 25 basis point hike, bringing the key rate to 4.25% in the next week and will likely be the last increase of its tightening cycle. However, the bank is expected to maintain rates at restrictive levels to reassure, and incoming data will ultimately decide when the first rate cut will come or when the bank will maintain rates highs. In the meantime, recent economic data, including inflation numbers and the Norwegian Krone (NOK) stability, have generally aligned with the central bank's expectations.

For next week’s Federal Reserve (Fed) decision, markets have already warranted a pause, but attention is set on the monetary policy statement and Chair Powell’s tone. The last data sets have shown that the US economy is holding firm, seemingly achieving a soft landing while inflation figures accelerated in August, so one more hike will be justified. As for now, the CME FedWatch tool indicates that the odds of a 25 basis point hike in November or December have somewhat eased to 35%.

USD/NOK Levels to watch 

 Based on the daily chart, the USD/NOK exhibits a bullish outlook for the short term. Both the Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) remain in positive territory, with the RSI above its midline and showing a northward slope. The MACD is also displaying green bars, indicating a strengthening bullish momentum. Furthermore, the pair is above the 20,100,200-day Simple Moving Average (SMA), suggesting that the bulls are firmly in control of the bigger picture.

 Support levels: 10.703,10.671 (20-day SMA), 10.625.

 Resistance levels: 10.779, 10.837, 10.850.

USD/NOK Daily Chart