EUR/SEK fell sharply yesterday after the Riksbank maintained the view that interest rates are likely to be increased towards the end of this year or early next year, disappointing those who expected a dovish shift. The pair slid below the upside support line taken from the low of July 25, as well as below the 10.700 zone, to eventually hit the key support territory of 10.655. The fact that the rate fell below the aforementioned upside line paints a cautiously negative picture in our view, but we would prefer to wait for a dip below 10.655 before getting confident on further declines.
If the bears are strong enough to stay behind the steering wheel and drive the battle below 10.655, we may see them setting the stage for the low of Aug. 14, at around 10.610. Another dip, below 10.610, could carry more bearish implications, perhaps opening the path towards the 10.580 zone, which acted as a decent resistance on July 26 and 29.
Taking a look at our short-term oscillators, we see that the RSI lies slightly above 30, but points down and look ready to slip below that line, while the MACD stands below both its zero and trigger lines, pointing south as well. Both indicators detect strong downside momentum and support the notion for some further declines in this exchange rate.
On the upside, we would like to see a return, not only above the pre-discussed upside support line, but also above the 10.773 zone, before we start examining whether the bears have left the building. Such a move may encourage the bulls to push towards the 10.824 hurdle, marked by the high of Sept. 3, the break of which could extend the recovery towards the high of Aug. 30, at around 10.855.
