NOK bears could re-group ahead of the Norges Bank meet
Sept 11 (Reuters) -The Norwegian crown hit a new short-term trend low point versus the euro on Tuesday, but the subsequent recovery from 11.9940 to 11.9440 into the close could be the precursor to a deeper pullback in EUR/NOK.
Widening interest rate differentials, in the NOK's favour, have done little to improve the currency's position, and a 3.25% depreciation since Aug. 5 has brought the EUR/NOK 12.00 level into view.
Norwegian inflation dropped to 3.2% in August, clear below the Norges Bank's 3.6% estimate, but currency weakness will continue to underpin the central bank's hawkish stance and could force one further rate hike before the start of an easing cycle in early 2025.
Given the magnitude of the crown's fall, and with the next Norges Bank policy meeting next week, the 12.00 level could attract profit taking and trigger a correction lower.
With falling oil prices, seasonal flows and a jittery risk sentiment, any pullback in EUR/NOK is likely to be limited, even with a hawkish Norges bank.
EUR/NOK technicals levels to watch are at 12.0105, a 76.4% Fibonacci retracement of the 12.1330-11.6140 Aug. 5-30 drop. Profit taking can set in ahead of this Fibonacci level. To the downside, a minimum correction of the 11.6140 to 11.9940 climb is at 11.9043.
For more click on FXBUZ
EUR/NOK daily candle chart: https://tmsnrt.rs/4dZGAFa
(Peter Stoneham is a Reuters market analyst. The views expressed are his own)
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