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IronFX Essential Intraday Comment | 13/08/2015 USD/SEK

• The dollar traded higher against most of its G10 peers during the European morning Thursday, ahead of the US retail sale for July. It was higher against AUD, NZD, CAD, EUR and JPY, in that order, while it was lower only against SEK. The greenback was virtually unchanged against NOK, CHF and GBP.

• The Swedish krona soared after the country’s CPI fell less than expected in July, providing relief to the Riksbank to take further action at its September meeting. The headline CPI fell 0.1% yoy from -0.4% yoy, above market consensus of -0.4% yoy. As for the CPIF, the Bank’s closely watched inflation measure, it rose 0.9% yoy in July from 0.6% yoy in June, beating expectations of an unchanged rate of increase. As such, USD/SEK fell more than 0.80% at the release and declined even more in the following hour. Although we would expect the improved inflation outlook to lessen the need for the bank to act again anytime soon, which could support SEK in the short-term, we would sound a note of caution for the medium term as Sweden is still in deflation. Therefore, the central bank may still need to do more to underpin inflation in the coming months and SEK could come under renewed selling pressure.

USD/SEK collapsed during the European morning Thursday, following the better-than-expected inflation data from Sweden. The pair found resistance marginally above the 8.6100 (R2) level, fell below 8.5700 (R1), and is now headed towards the psychological zone of 8.5000 (S1). As long as the rate is trading below the short-term downtrend line taken from the peak of the 7th of August, I would consider the short-term bias to be negative. A clear move below the key area of 8.5000 (S1) could have larger bearish implications and perhaps open the way for our next support of 8.3900 (S2). Our short-term oscillators detect strong downside speed and corroborate my view. The RSI edged lower and now looks ready to fall below 30, while the MACD stands below both its zero and trigger lines and points south. On the daily chart, I still see a longer-term uptrend. However, there is negative divergence between our daily oscillators and the price action, which increases the likelihood for further downside correction.

• Support: 8.5000 (S1), 8.3900 (S2), 8.3100 (S3)

• Resistance: 8.5700 (R1), 8.6100 (R2), 8.6700 (R3)

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