USDNOK Turning Higher

The unwinding of USD short positioning has seen the greenback spiking higher against each of its major counterparts. The moves have been more pronounced in some areas with USDNOK seeing a more than 5% surge. NOK has been one of the strongest performers against USD over the last year, benefitting from the firm recovery in oil price, which ahs kept export income high, and the divergence between Norges bank policy and that of the rest of the G10. However, if USD begins to improve now on tightening expectations, this divergence will soon evaporate, leading USDNOK higher. Furthermore, if a higher USD begins to weigh on oil prices, this will add further pressure for NOK, sending the pair higher. With MACD and RSI turned higher here, a break above 8.7317 will target 8.9447 initially. To the downside, any retest of 8.3947 should act as support.

Key Data to Watch

A raft of USD releases this week will be the main focus. Any upside improvements in PMIs, durable goods and PCE should help spur the Dollar rally on further. Any weakness, however, will likely see consolidation continue around current levels while traders await fresh upside catalysts.