Following the false downside break of the bull channel off YTD lows, USD/NOK has since traded back up into the middle of the channel and is currently holding within a contracting triangle pattern.
The pattern has formed around the latest test of the 9.1112 level and, while MACD and RSI are turned lower, for now, the focus is on an eventual break higher towards the 9.4193 level, in line with the broader bull trend. Currently, the retail market is around 60% long, which we will need to see a shift before an upside break can develop.
Data To Keep An Eye On
With a light data sheet ahead of Christmas, this week's key focus will be on risk sentiment and developments within the COVID backdrop. Suppose risk sentiment continues to deteriorate, potentially around the news of new restrictions being added in places. In that case, this is likely to weigh on oil prices, which will pull NOK lower, creating room for a continuation higher in the pair.
US Core PCE on Thursday will be key to watch also. A solid print will further sharpen the focus on Fed tightening expectations, keeping USD in demand as we head into the end of the year.