USD/NOK declines after Norges Bank dovish hold, dovish Fed

• USD/NOK jumped from a low around 11.108 to 11.150, seeing mild losses.
• The USD weakness is driven the pair downwards.
• As well as the Fed, the Norges Bank held rates steady and showed a dovish tone.
• All eyes are now on Nonfarm Payrrolls from the US on Friday.

In Thursday’s session, the USD/NOK cleared part of its daily losses after the Norges Bank decided to hold rates steady jumping from 11.108 to 11.150, still holding daily losses. On the other hand, the Greenback is performing poorly due to the Federal Reserve’s (Fed) dovish tone on Wednesday’s decision and a positive market enviroment.

Jerome Powell suggested that the Federal Reserve has covered significant ground, hinting that the rate hike cycle is nearly ending. He also indicated that future decisions will involve considering tighter financial conditions and the overall impact of the cumulative effects of the monetary policy. This sparked a surge in risk-on flows and a weakening of the US Dollar as markets are confident that interest rates have already hit their peak. 

Ahead of Friday's Nonfarm Payroll report, the US Department of Labor reported that Initial Jobless Claims for the week ending on October 28 surpassed expectations at 217,000, higher than the consensus of 210,000 and up from the previous 212,000. Market forecasts for Friday's job report anticipate a deceleration in job growth to 118,000, down from the revised September figure of 336,000. Average Hourly Earnings are expected to slow slightly, with Unemployment predicted to remain steady at 3.8%.

On the Norges bank side, it held rates steady at 4.25%, as expected. The statement pointed out that the bank is considering another hike in December, but the tone was more confident, assuring that inflation is decelerating. As for now, the swaps markets are discounting a 40% chance of a 25 basis point hike in the December meeting, and as long those bets remain high, the NOK’s downside is limited.

USD/NOK Levels to watch 

 Observing the daily chart, signs of bullish exhaustion are apparent for USD/NOK. Having turned flat in positive territory, the Relative Strength Index (RSI) suggests a potential market equilibrium with balanced buying and selling pressure, while the Moving Average Convergence (MACD) displays stagnant green bars.

However, the pair remains above the 20,100,200-day Simple Moving Average (SMAs), implying that the bulls retain control on a broader scale.

 Support levels: 11.140, 11.083, 11.027 (20-day SMA), 

 Resistance levels: 11.200, 11.235, 11.276.