USD/SEK stops the bleeding amid US S&P PMI data, eyes on next week’s Riksbank decision

• The USD/SEK pair registers moderate gains, hovering around the 10.280 level.
• Robust Service S&P Global PMI from December PMIs lifted the US Dollar.
• Markets await next week’s Riksbank decision, with no rate hike expected.

In Friday's session, the USD/SEK pair is pushing forward with gains, trading fairly at the 10.280 level. These upward movements have largely been driven by the aftermath of the US S&P PMI data release, which made the US Dollar find a lift after three consecutive days of losses.

In the first part of December, the US private sector slightly expanded according to the S&P Global Composite PMI, which inched up to 51.0 from November's 50.7. However, the Manufacturing PMI showed continuing contraction, dropping to 48.2 from 49.4. On the positive side, the Services PMI showed a slight improvement, rising to 51.3 from 50.8, which seems to make the US Dollar strengthen against its peers.

Next week, when the Riksbank announces it last monetary policy decision in 2023, the pair may see further volatility. In that sense, the Federal Reserve (Fed), hinted at more easing than expected on Wednesday, which fueled a US Dollar sell-off so  monetary policy divergences may set the pair's pace in the short term. As for now, the Swedish bank kept its rates steady in November and is expected to do as well in next week’s meeting, while 25 bps of easing are being discounted by swaps markets at the beginning of 2024.

In November’s meeting minutes, the Swedish bank recognized that the labor market and the overall economy were slowing down and weren’t seen committed to further tightening, but they did leave the door open if needed.

USD/SEK levels to watch

On the daily chart, the pair exhibits a bearish stance. This is underpinned by the Relative Strength Index (RSI), which, even though it shows a positive slope, continues to highlight seller dominance as it stands in negative territory. The overall picture is further exacerbated by the Moving Average Convergence Divergence (MACD), which is evenly poised with flat red bars, often suggestive of a prevalent bearish momentum.

Considering the Simple Moving Averages (SMAs), the evidence of bears' influence becomes even more persuasive. The pair trades below the 20, 100, and 200-day SMAs, emphasizing the unchallenged stronghold of bearish influence on the broader context.

In that sense, the recent trading pattern reveals that the bears are on a breather following a three-day losing streak. However, this pause of the bearish trend does not necessarily denote a shift in momentum but can simply be a matter of price re-balance before the selling pressure resumes.

Support Levels: 10.250, 10.220, 10.150.
Resistance Levels: 10.325, 10.350, 10.405 (20-day SMA).

USD/SEK daily chart