USD/NOK advances mildly driven by higher US yields

• The USD/NOK is seen at 11.0480 with mild gains.
• US government bond yields are rising and rebounded, providing support to the USD.
• Chair Powell and several other Fed officials will be on the wires during the week.

The USD/NOK stayed firm in Monday's session and traded at the 11.0480 area with mild gains, driven by rising US bond yields and a negative market mood, which dictated the pace of the movements during the session. In either country, no relevant data was released, and the week’s highlights will be Jerome Powell and other Federal Reserve (Fed) official's speeches, where investors will look for further clues on the next decisions.

As for now, the USD has weakened significantly, mainly because markets are confident that the Fed is reaching the end of its tightening cycle as the effects of the monetary policy are starting to kick in just now. On Friday, the US Nonfarm Payrolls report saw the job creation pace decelerating and the Unemployment rising, signs that the Fed officials wanted to see. As a reaction, the US yields plummeted, as well as the hawkish bets on the next December meeting of the Fed, as swaps markets are now pricing only 10% odds of a 25 bps hike.

That being said, Powell left the door open for another hike in December in case the data justified it, and the bank will get two inflation readings and a jobs report until then, which will likely shape the decision.

In the meantime, the US Treasury bond yields, which fell to multi-week lows last week, are recovering and have helped the US dollar stop its bleeding. The 2-year bond rate rose to 4.90%, while the 5 and 10-year yields increased to 4.60% and 4.65%. 

USD/NOK Levels to watch

Based on the daily chart, USD/NOK maintains a neutral to bearish technical perspective, with the bears gradually asserting themselves but still have more work to do. The Relative Strength Index (RSI) has a flat slope near the bearish territory, while the Moving Average Convergence (MACD) histogram presents bigger red bars.In the larger context, the pair is below the 20-day Simple Moving Average (SMA), but above the 100 and 200-day SMAs, implying that the bulls remain in control on a broader scale.

Supports: 11.038, 11.025, 11.020
Resistances: 11.057 (20-day SMA), 11.110, 11.150.

USD/NOK daily chart