Data on inflation for May will be published on June 14, 2018 in Sweden. Will USD/SEK fall?
Such a movement means the strengthening of the Swedish krona. Most market participants expect an increase in inflation to 1.9% in annual terms from 1.7% in April of the current year. Thus, it can come close to the target level of 2% set by the Swedish Central Bank (Riksbank). High inflation increases the probability of a rate hike, which is now minus 0.5% in Sweden. Last week, the First Deputy of Central Bank Kerstin af Jochnick expressed an opinion that the Swedish krona will be strengthened in the long run. The next Riksbank meeting will be held on July 3, 2018. In April, representatives of the Central Bank said that the rate be raised at the end of this year. The tightening of the monetary policy can support the rate of the Swedish krona.
On the daily timeframe, USD/SEK: D1 approached the second support line of the uptrend. Before opening a sell position, it should be breached down. Investors’ expectations of a rate hike by the Swedish Central Bank can contribute to the decrease of the currency pair.
- The Parabolic indicator gives a bearish signal.
- The Bollinger bands have narrowed, which indicates low volatility. They are titled down.
- The RSI indicator is below 50. It has formed a negative divergence.
- The MACD indicator gives bearish signals.
The bearish momentum may develop in case USD/SEK falls below the two last fractal lows at 8.63. This level may serve as an entry point. The initial stop loss may be placed above the two last fractal highs, the 14-month high, the upper Bollinger band and the Parabolic signal at 8.98. After opening the pending order, we shall move the stop to the next fractal high following the Bollinger and Parabolic signals. Thus, we are changing the potential profit/loss to the breakeven point. More risk-averse traders may switch to the 4-hour chart after the trade and place there a stop loss moving it in the direction of the trade. If the price meets the stop level at 8.98 without reaching the order at 8.63, we recommend to close the position: the market sustains internal changes that were not taken into account.
Summary of technical analysis
Position Sell
Sell stop Below 8.63
Stop loss Above 8.98