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    IronFX Intraday Comment | USD/SEK | 11/02/2016

    • The dollar traded higher against most of its major counterparts during the European morning Thursday. It was higher against AUD, GBP, NZD, NOK, CAD and SEK in that order, while it traded lower vs JPY, CHF and EUR.

    • Sweden’s central bank delivered a more aggressive than expected rate cut today, moving its interest rates deeper into the negative territory. It reduced its repo rate to -0.50% from -0.35% previously vs expectations of a cut to -0.45%. The Bank also revised down its 2016 inflation forecast and effectively expanded its QE program by saying it will reinvest the profits from maturing bonds. In the statement, officials argued that given the downward revision in inflation, if they stayed on hold the confidence in reaching the inflation target may weaken. The strength of SEK was also a reason for the Riksbank to act today. Further appreciation in the krona could drag inflation lower. Officials signaled that they are still highly prepared to ease further should it be judged necessary, by reducing the repo rate, extending the QE program or intervening directly into the currency market. SEK plunged on the news as the cut was larger than expected but recovered most of its losses within the following hours. Given the Bank’s determination to keep the currency weak, we would treat any sharp strengthening of the krona in the foreseeable future as providing renewed selling opportunities.

    • USD/SEK surged following the Riksbank decision to cut more-than-expected the official cash rate, but gave back all the gains in the following hour. The pair hit resistance slightly below our 8.4880 (R1) level, at the black downside resistance line taken from the highs of the 29th of January, and fell to trade back above the 8.3960 (S1) support line. Even though a clear break below that area could carry larger bearish implications and perhaps challenge our next support at 8.3630 (S2), the short-term trend is still sideways in my view. Our momentum indicators support this notion. The RSI moves along its 50 line, while the MACD, stands close to its zero line pointing sideways as well. This is another reason I would prefer to see a decisive break below 8.3630 (S2) before trusting further declines. 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 lower in the short run, I would consider the longer-term path to be to the sideways as well.

    • Support: 8.3960 (S1), 8.3630 (S2), 8.3200 (S3)

    • Resistance: 8.4880 (R1), 8.5200 (R2), 8.5770 (R3)

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