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IronFX Intraday Comment | USD/SEK | 18/01/2016

• The dollar traded higher or unchanged against its major counterparts during the European morning Monday, in a light economic calendar. It outperformed AUD, NZD and JPY in that order while it traded virtually unchanged against SEK, CHF, EUR, CAD, GBP and NOK.

• In the absence of any major market moving events, the Riksbank released the minutes of its January 4th extraordinary policy meeting. At this meeting, the Governor and Deputy Governor were granted powers to instantly intervene in the currency market to safeguard the upturn of inflation, from a possible rapid appreciation of the krona. The minutes of the meeting showed that the two officials will decide on the time and amounts for the interventions and noted that the rise in inflation still depends largely on the weak SEK. The Deputy Governor expressed his opposition to the decision, supporting that currency interventions would require action over a long period to have clear impact on the exchange rate. That would entail considerable risk for the Bank’s balance sheet and equity, especially given their forecast that the krona will strengthen over the coming years. In a situation where the outlook of inflation was to deteriorate further, he suggested that a repo-rate cut would be the appropriate tool to use. Overall, the minutes did not disclose any critical information regarding the circumstances of a possible intervention. They instead indicated that the most likely scenario is one in which the krona strengthens faster than it was forecast, and before domestic inflation picks up.

• USD/SEK traded somewhat lower during the European morning Monday, but the decline was stopped by the 8.5700 (S1) support barrier. As long as the pair is trading above the short-term uptrend line taken from the low of the 29th of December, I would consider the near-term picture to be cautiously positive. However, I would prefer to see a clear break above the key resistance of 8.6150 (R1) before getting more confident on the continuation of this upside path. Such a break is likely to open the way for our next resistance of 8.6600 (R2). Looking at our momentum indicators, I see that the RSI stands above its upside support line and turned up again, confirming the positive momentum towards the pair. However, the MACD, although positive, shows signs of topping. This is another reason I would prefer to see a decisive break above 8.6150 (R1) before trusting the short-term uptrend. As for the broader trend, USD/SEK has been oscillating between the support territory of 8.1000 and the resistance zone of 8.8300 since mid-January 2015. As a result, although we may see the pair trading higher in the short run, I would consider the longer-term path to be to the sideways.

• Support: 8.5700 (S1), 8.5300 (S2), 8.4950 (S3)

• Resistance: 8.6150 (R1), 8.6600 (R2), 8.7200 (R3)



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