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USDSEK Trades Lower on Upbeat Sweden CPI: Riksbank Interest Rate Decision Eyed

The USDSEK is trading lower today on the back of better-than-expected Consumer Price Index data. According to data released this morning, the monthly Sweden Consumer Price Index came in at 0.1%, which was better than the 0.0% that was expected. Also, the annualized figure came in at 1.8%, which was also better than the expected figure of 1.7%.

The news was well received by traders of the Swedish Krona, which found bids as soon as the news came out, driving the USDSEK lower. The USDSEK is currently trading at 9.4364, down more than 640 pips on the day.

Why is the Sweden Consumer Price Index Important?

These figures reflect the Consumer Price Index with a Fixed Interest Rate (CPIF), excluding energy. The main CPIF figure shows that inflation has accelerated from 1.5% to 1.7% on an annualized basis, which is in line with the expectations of the Riksbank. However, the CPIF ex. Energy CPI figure was 0.1% below the expectations of the Riksbank.

A breakdown of the report showed that many of the component indices measured had all ticked up above expectations. Cost of electricity rose 0.06% above the projections, as well as food prices which had largely been expected to remain stagnant. Cost of home electronics also rose when the expectation was for prices to have fallen.

Therefore, the CPIF could largely be accounted for by the higher-than-expected increases in prices for goods, food and energy. These have all increased the expectations for a rate hike to 0.0% by the Riksbank in its December meeting, hence the increased bids on the SEK.

Technical Outlook for USDSEK

If the expectations of the market are anything to go by, we may yet see more downside on the USDSEK. If this is the case, then expect the USDSEK to make a push towards the 9.36913 initial downside target (previous highs of Feb 18 and July 1, as well as previous low of June 7). Below this area, further support lies at the July 4, 18 and 19 lows of 9.30300.

On the flip side, price recovery in profit-taking pullback could target the previous highs of March 8 and July 9 highs of 9.49911. Further north, resistance lies at the 9.54471 price level (April 26 and June 19 highs). A price break of the point to the north invalidates the descending channel.

However, any price recovery could be an opportunity for those who are bullish on a rate hike to initiate USDSEK selling positions on rallies.

A preview on the Riksbank interest date decision will be provided next week.