The Swedish Krone plunged more than 0.5% against the greenback after the Riksbank surprised with a rate cut to the record low of -0.35% from -0.25% before, to boost its Inflation rate, a move that the central bank did repeatedly over the last years. This rate cut was the third in 2015 after February’s and March’s. The Swedish Inflation rate picked up considerably in May but stills far below the Central Bank’s Target of 2.0%.
Despite seeing plenty of volatility in the USD/SEK pair few days ago, which saw it break below the 50-period SMA and the 23.6% Fibonacci level, the pair found a strong support from the 200-period SMA near the 8.1600 level and is now back trading near the 8.4370 area, where the 100-period SMA and the descending trend line, which started mid-April, combined to provide a significant resistance to the bulls. There’s clearly still a lot of indecision in the pair with traders still appearing to favour a break above than below, especially if we also consider the response to the massive support level of 8.0330 as well as to the 8.1600 level. c
Following the cut from the Riksbank the dollar surged above the 8.4370 barrier and it seems that there is a clear battle going on slightly above the upper boundary of the sloping channel, which could be translated as a flag formation, even though it appeared in the daily chart. This is typically a bullish continuation pattern. The case now is if the pair could sustain its gains above the 100-period SMA, the 8.4370 level and the descending trend line. A break above these would be very bullish, initially prompting a move towards the previous highs of 8.5960, followed by 8.7550 above this. Both oscillators violated their downward sloping resistance lines and alongside with the bullish cross of the mid-levels it increases the probability of further upward movement.
On the other hand, if the pair turns lower, support should be found around 8.0330 and then at 7.8500. A close below here would have suggested that the pair had entered a new downtrend.
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