The British pound extended losses against the Norwegian krone yesterday after Prime Minister Johnson said he would seek a snap General Election, introducing fresh uncertainty into the pound’s outlook. Investors are now awaiting the vote by the UK Parliament, which should be held on December 12th.
The renewed Brexit deadlock comes at a time of global market uncertainties and trade worries. The Norges Bank left its benchmark rate steady at 1.5% at its latest monetary policy meeting, despite expressing concerns over a further weakening krone and increased inflationary pressure.
During the Asian session, the pound managed to pare some losses against the krone, after reaching a low of 11.69 yesterday. As of 7:00 London time, the pair traded at 11.74. Rising oil prices have also supported the Norwegian krone during this week.
From a technical standpoint, the recent move upwards in the GBP/NOK pair looks quite overstretched, as shown by the 14-day RSI that reached extreme overbought levels. Still, in a fundamentally-driven uptrend like this, oscillators can remain overbought for an extended period of time.
Yesterday’s candlestick formed a long lower wick, signaling that the market rejects lower prices at the moment and that buyers are ready to step in at prices below 11.70.
To the downside, we see a short-term support level at yesterday’s low of 11.69, followed by 11.63 that aligns with the 38.2% Fib level and a bullish channel support on the daily chart. Today’s (and end-of-month) profit-taking activities might also put additional selling pressure on the pair.
Buyers should pay attention to the short-term resistance level at 11.765, formed by a recently broken support.