A combination of increased risk appetite in the financial markets this Tuesday as well as the Riksbank decision to leave interest rates unchanged is boosting the Swedish Krona against the US Dollar this Tuesday. The USDSEK is down 1.24% on the day as the Swedish central bank decided to keep the repo rate unchanged at 0.0%. The Riksbank is also leaving the size of its quantitative easing program untouched but has altered the implementation of the program to include new purchases of 18bn SEK worth of Swedish government bonds as well as the purchase of 85bn SEK worth of covered bonds. These bond purchase will be conducted in a 5-month window to commence on May 1.
The Riksbank also lowered GDP forecast for 2020 to -6.9%. It expects the economy to bounce back in 2021 with a 4.6% growth as the economy pulls through the coronavirus pandemic. The bank also projects that the unemployment rate could hit a high of 9.4% in Q2 2020, with inflation projected at 0.4%.
Analysts predict that the Riksbank may leave interest rates at 0.0% until Q1 2021. However, the Riksbank has indicated its willingness to cut rates to stimulate demand.
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Technical Outlook for USDSEK
The Swedish Krona firmed on the news, while the adoption of risky appetite in today’s trading is also weighing on the US Dollar. The combined effect has been the drop in the USDSEK seen on the day, which has taken the price action candle below the symmetrical triangle in a breakout move. This move now takes the USDSEK towards the previous lows of 30/31 March 2020, where the pair is expected to encounter support.
If the downside momentum is enough to breakdown the support level at 9.87902, this will allow the next support at 9.80863 to come into the picture. This is where we have previous lows of April 1, 2020. Further support levels lie at 9.75500 and 9.68979 respectively, with the latter poised for interaction with the 200-SMA dynamic resistance line.
On the flip side, a price bounce at 9.87902 could permit a pullback to the upside, which allows a retest of the 9.95640 resistance level. A push towards 10.13054 invalidates the triangle pattern. 10.20611 could become relevant if the price recovery breaches the 10.13054 resistance.