Norges Bank hikes 50bps; more to come?

Norway’s central bank hiked rates by 50bps today, as expected, to bring the key interest rate to 1.75%.  This follows a 50bps hike at its previous meeting and brings the rate to its highest level since 2012.  The Norges Bank noted that the increase in rates was necessary due to a broad-based rise in prices in recent months, which may remain high for longer than expected earlier. It also referenced the current high level of inflation in Norway, which is 6.8%, and the low unemployment rate of 3.2%, as justification for the large increase.   In addition, the Central Bank noted that “a faster rate rise now will reduce the risk of inflation becoming entrenched at a high level and the need for a sharper tightening of monetary policy”.  The rate hike comes on the heels of many central bank rates increases over the last year to try and bring down the overall level of inflation.

What is inflation?

EUR/NOK made a near-term low on April 8^th at 9.4337, then aggressively rallied to 10.5406 by June 16^th. The pair then pulled back to the 61.8% Fibonacci retracement level from the April 8^th lows to the June 16^th high near 9.8565.  Today, the candlestick on the daily chart is forming a bearish engulfing pattern.  If price closes below 9.8210, it could indicate that further downside could be ahead.

Source: Tradingview, Stone X

Trade EUR/NOK now: Login or Open a new account!

• Open an account in the UK
• Open an account in Australia
• Open an account in Singapore

On a 240-minute timeframe, if EUR/NOK does continue to move lower, first support is at the hammer lows from August 15^th at 9.7244.  Below there, price can trade down to horizontal support dating to April 11^th at 9.6111, then the lows from April 8^th at 9.4337.  First resistance is at the 200 Day Moving Average near 10.0163 (see daily), then a confluence of resistance at the highs of August 5^th and the 38.2% Fibonacci retracement from the highs of June 16^th to the lows of August 12^th between 10.0202 and 10.0381.  Above there, is another confluence of resistance at horizontal resistance at the 50% retracement of the same timeframe at 10.1330.

Source: Tradingview, Stone X

The Norges Bank hiked rates by 50 bps to 1.75% given the recent high levels of inflation. The central bank cited the rapid increase in inflation and low unemployment as justification to due to.  If inflation continues to increase in Norway, expect that the Norges Bank will continue to hike rates!

Learn more about forex trading opportunities