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    IronFX Intraday Comment | USD/SEK | 18/02/2016

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

    • In a quiet calendar day so far, Sweden’s CPI data showed that inflation skyrocketed to 0.8% yoy in January from 0.1% yoy previously, above expectations of a rise to 0.5% yoy. Despite the strong CPI acceleration, we believe that Swedish policymakers may not be too satisfied, as the rise was partly driven by higher prices for electricity and, to a lesser extent, fuel prices. Thus, as we expected, part of the increase was due to energy related base effects in the CPI’s calculation, which does not give concrete evidence to the Riksbank that the uptrend in inflation is stable. The Krona strengthened against the euro following the data and continued to trade even higher in the following hours. Bank officials repeated several times that they are willing to ease further or even intervene in the FX market to weaken SEK and protect inflation. If February’s CPI data confirm that inflation is indeed trending higher and the acceleration in today’s data was not only due to base effects, we believe that the Bank is likely to refrain from easing further at its next meeting. However, this does not exclude the possibility of intervention if SEK starts to strengthen considerably.

    • USD/SEK tumbled during the European morning Thursday as the Swedish CPI rate rose by much more than expected. However, the decline was stopped by the 8.4430 (S1) barrier. Given that the rate started sliding after it hit the downside resistance line taken from the peak of the 21st of January, I would expect the negative move to continue for a while. A break below the 8.4430 (S1) support could carry extensions towards the next obstacle of 8.4085 (S2). Further declines are also supported by our short-term oscillators. The RSI turned down and crossed below its 50 line, while the MACD, although positive, has topped and fallen below its trigger line. Switching to the daily chart, I see that the pair is still trading within a wide sideways range between 8.1000 and 8.8300 since January 2015. Therefore, although we may experience some further near-term declines, I would consider the long-term outlook of the pair to be neutral.

    • Support: 8.4430 (S1), 8.4085 (S2), 8.3570 (S3)

    • Resistance: 8.5200 (R1), 8.5800 (R2), 8.6160 (R3)

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