As the daily chart below shows, EURSEK ran into resistance at 9.70 in both mid-December and mid-February, and the pair has since dropped all the way down below the intervening low, or the “neckline” of the double top pattern at 9.26. It is notoriously difficult to identify effective double top patterns, but the secondary indicators further support the view that EURSEK may have carved out a significant medium-term top. Both the MACD and RSI indicators showed a clear bearish divergence at the recent highs, and both indicators have now dropped to their lowest levels in over a year. Combined with today’s drop through the bottom of the 2-year bullish channel, there is plenty of technical evidence that the EURSEK could weaken further in the coming weeks.
If EURSEK continues to drop, the next major level of support is the 38.2% Fibonacci retracement of the 2-year rally at 9.1280. A break below that potential floor could expose psychological support at 9.00 or even the double top measured move target down around 8.8500 later this year. As long as the pair stays below its bullish channel and 100-day MA around 9.35, the Swedish krona could finally enjoy its day in the day in the sun.
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