Marshall Gittler
Trading Analysis
USD/SEK
The dollar traded unchanged or lower against its G10 counterparts during the European morning Monday. It was lower against JPY, NZD and GBP, in that order.
The Ifo Business climate index fell to 106.3 in August from 108.0 the previous month. This was the fourth successive drop in the index, confirming that the German economy continues to lose steam. The expectations index also declined for a fourth successive month, to reach its lowest level since May 2013. On top of the poor data coming from the single currency bloc, the recent comments and concerns of ECB president Draghi and the persisting geopolitical tensions in the region, I see EUR continuing to weaken, especially against USD.
Over the weekend, Sweden’s Ministry of Finance cut the nation’s GDP growth forecast for a second time in two months. Swedish economy is now expected to expand 1.9% in 2014 vs July’s forecast of 2.5%. With three weeks left before general elections in Sweden, USD/SEK opened with a larger gap than the other G10 peers and remained at its opening level as uncertainty over the next winner in elections and the growth cut raise concerns over the future path of the Nordic economy.
USD/SEK opened the European trading Monday with a gap up, but after finding resistance at 6.9430 (R1), it retreated somewhat. Taking a look on our momentums studies, I can identify negative divergence between the rate and the RSI, while the MACD, although positive, seems ready to top and could move below its signal line in the near future. Having in mind the weakness signs provided by our oscillators, I would expect the forthcoming wave to be to the downside, A move below the support line of 6.9200 (S1) is likely to confirm the pullback and could trigger extensions towards the next support, at 6.8800 (S2). Nevertheless, in the bigger picture, the overall trend is to the upside, as marked by the blue uptrend line, connecting the lows of the price action on the daily chart. Thus, I would consider any possible future declines as a corrective wave of the longer-term upside path.
Support: 6.9200 (S1), 6.8800 (S2), 6.8300 (S3) .
Resistance: 6.9430 (R1), 7.0000 (R2), 7.0775 (R3).
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