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IronFX Intraday Comment | USD/NOK | 11/01/2016

• The dollar traded mixed against its G10 counterparts during the European morning Monday. It was higher against JPY, CHF and EUR in that order, while it traded lower against NZD, AUD, CAD and GBP. The greenback remained virtually unchanged vs NOK and SEK.

• In the absence of any major market moving events, Norway’s December CPI rate slowed to 2.3% yoy from 2.8% yoy previously and missed expectations of 2.7% yoy rise. The unexpected decline in the rate came mainly as a result of food prices falling by as much as 3% on a monthly basis. Despite the miss in expectations, the weak krone continues to drive up import prices and keeps inflation strong. If the effect of the krone’s decline fades out, there is a reason to believe that inflation could fall further. On top of that, the lower oil prices are likely to keep wage growth subdued, and this could weaken inflation further. As a result, we expect market participants to continue to monitor oil prices as an indication of NOK’s short-term direction, which we believe is poised to move lower.

• USD/NOK traded higher during the European morning Monday after it hit the key support zone of 8.8150 (S1), which has been also the upper bound of the short-term sideways range the pair had been trading from the 7th until the 31st of December. Given that the rate is trading above that barrier, I would consider the short-term outlook to be positive and I would expect a clear move above 8.9250 (R1) to set the stage for extensions towards the psychological zone of 9.0000 (R2). Looking at our short-term oscillators, I see that the RSI turned up again and just poked its nose above its 50 line, while the MACD shows signs of bottoming marginally above zero. These indicators support somewhat my view that the next move is likely to be positive. In the bigger picture, USD/NOK is trading above the uptrend line taken from the low of the 22nd of August 2014 and as a result, I would consider the longer-term path of the pair to be positive as well.

• Support: 8.8150 (S1), 8.7765 (S2), 8.7065 (S3)

• Resistance: 8.9250 (R1), 9.0000 (R2), 9.0450 (R3)

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