At the beginning of this month, we highlighted a developing pattern on the USD/SEK that pointed to a possible pullback from the key 6.50 area (see “Wait a SEK!” below for more details). As it turned out, the pair found support quickly at the initial 38.2% Fibonacci retracement (6.4420) and turned back higher shortly after the article was published. As always, we specifically mentioned the level where our outlook would shift; in this case, that level was the 9-month bearish trend line near 6.52. Since breaking above that level, the USD/SEK has continued to tack on gains, rallying to a high of nearly 6.60 in today’s early US session trade.
Meanwhile, we noted a related development in the correlated EUR/SEK earlier today on twitter:
Although the SEK has already dropped substantially against its two of its most important rivals, the technical evidence points to the potential for more krona weakness in the short-term.
As we noted above, the USD/SEK is breaking out to a new 2014 high near 6.60 as of writing. With rates now conclusively above the 9-month bearish trend line and 200-day moving average, bears are in “retreat mode.” The secondary indicators generally confirm this shift, with the RSI breaking conclusively above the 60 area highlighted two weeks ago and the MACD trending higher above its signal line and the “0” level.
To the topside, the next near-term levels of resistance to watch are the 78.6% Fibonacci retracement at 6.6220 and the 9-month high at 6.7030. On the other hand, a break back below the previous trend line and the 200-day MA at 6.50 would erase the current bullish bias.
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