USD/SEK: Uptrend to Resume After Correction on FOMC Rate Hike

The USD/SEK looks set to end the week lower, despite being higher on the day. The pair is down 2.17% this week as the bears extend the pair’s slide following last week’s rejection at the 10.674567 price mark, the site of a previous high seen in late July 2001. 

The decline is more of a corrective move after the pair surged from its March 2022 low at 9.2294 and coasted on the back of USD strength to last week’s 21-year high. Moreover, expectations of tighter and more aggressive monetary policy by the Fed have driven the greenback to two-decade highs against many of its peers, especially those whose central banks have been slow to get off the mark with higher rates.

Sweden’s Riksbank had raised interest rates by 50bps to 0.75% in its last policy meeting. However, given how aggressive the Fed has been (total of 150bps so far with a possibility of 75bps-100bps next week), the dollar still has the upper hand against the crown. 

The recent decline has come off the completion of the bullish flag on the daily chart. With the price action now bouncing off a key trendline, the USD/SEK outlook is heading into next week’s FOMC decision. 

USD/SEK Forecast

The active daily candle’s uptick comes from a bounce on the 10.16739 support level (13 May high and 21 July low) and the ascending trendline that connects the lows of 31 March, 25 April, 30 May, and 21 July. An extension of this bounce targets the 10.46824 resistance initially (6 July and 15 July lows) before mounting a challenge on the 10.67457 recent high of 12 July if clearance of the former is achieved.

After that, 10.67457 needs to give way for the uptrend to resume, targeting 10.86371 (25 December 2001 high) and 11.06145 (6 July 2001 high). On the other hand, a breakdown of the 10.16739 support level and the trendline continues the corrective retracement, targeting 10.03666 initially (21 June low).

A further decline below this pivot gives the bears access to the 9.88362 support mark (19 May low). 9.68588 (3 June low) is an additional harvest point for the bears if there is further price deterioration. 

USD/SEK: Daily Chart