EUR/NOK climbs to fresh 2021 highs around 10.7000

• EUR/NOK pushes higher to new yearly tops beyond 10.7000.
• NOK remains offered on risk-off, lower crude oil prices.
• The Norges Bank is expected to raise rates in September.

The Norwegian krone depreciates further and lifts EUR/NOK to new YTD highs in the 10.7000 region on Tuesday.

EUR/NOK looks to oil, risks trends

EUR/NOK advances for yet another session on the back of the persistent selling pressure hitting the Norwegian currency.

Indeed, the ongoing selloff in crude oil prices drag the barrel of the European reference Brent crude to new 2-month lows in the $67.00 area on Tuesday. The renewed downside pressure in the commodity follows the recent OPEC+ announcement to increase the oil output.

Also weighing on NOK appears the low liquidity characteristic of the currency, which performs poorly in context where risk aversion prevails.

The soft note in the krone appears somewhat in contrast with the recent pick-up in NIBOR (short-term interbank rate) from sub-0.20% levels earlier in the month to the current 0.27%.

What to look for around NOK

NOK loses further ground and debilitates to the lowest level since mid-December 2020. As usual, price action around the krone is expected to track Brent dynamics and messages from the Norges Bank. That, coupled with a faster economic recovery, the firm vaccine rollout and prospects of a solid rebound in the global activity are seen collaborating with the view of a stronger currency in the medium-term. It is worth recalling that the Norges Bank is predicted to be one of the first central banks to hike rates in the DM space, likely in September.

EUR/NOK significant levels

As of writing the cross is up 1.10% at 10.6769 and faces the next resistance at 10.7799 (monthly high Dec.7 2020) seconded by 11.0000 (round level) and then 11.2113 (monthly high Oct.30 2020). On the other hand, a breach of 10.3402 (200-day SMA) would open the door to 10.1991 (50-day SMA) and finally 10.1381 (monthly low Jul.6).