USD/SEK: Swedish krona unstoppable rally accelerates ahead of FOMC

on Jul 29, 2020
  • The USD/SEK pair dropped to the lowest level since July 2018 on strong data from Sweden.
  • Data from the Swedish statistics office showed that business confidence jumped in July.
  • The pair will next react to the Federal Reserve interest rate decision.

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The USD/SEK pair is down by 0.25% as the strength of the Swedish krona accelerates. The pair is trading at 8.7580, a few pips above the intraday low of 8.7170. This price is the lowest it has been since July 9 2018.

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Positive data boost Swedish krona

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The Swedish krona has jumped by almost 12% in the past three months, making it the second strongest currency in the developed world. The Norwegian krone, which has jumped by 12.4% is the strongest currency.

There are several reasons behind the strength of the Swedish krona. First, the country did not order large shutdowns at the height of the virus. As a result, the economy did not suffer the damage experienced by other countries, like the US.

Second, the number of coronavirus cases has been falling. Yesterday, the country reported 303 cases, which is lower than the peak of 1,800 in June. Third, recent economic numbers have been relatively strong as I will mention below. Fourth, the USD/SEK has dropped because of the EU recovery funddeal that was reached last week.

Finally, the global economy has made some progress, which is a positive thing for the Swedish krona.

Yesterday, data from the country’s statistics office showed that retail sales rose by 3.5% in June after rising by 2.7% in the previous month. This was the best performance since February this year. On a month-on-month basis, the sales jumped by 1%.

On the same day, the office released relatively strong trade numbers from the country. In June, the country exported and imported goods worth SEK 119 billion and SEK 114 billion, respectively. As a result, the trade surplus rose to SEK 4.9 billion. These numbers were relatively better than what analysts were expecting.

And today, data from NIER showed that business confidence improved in July. The so-called economic tendency indicator rose 8.1 points to 83.4 in June. However, the consumer confidence indicator declined from 84.1 to 83.3.

USD/SEK waits for the Fed

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Like the GBP/USD pair, the next big mover for the USD/SEK pair is the Fed interest rate decision that will come out later today. This decision comes at a time when the US economy is going through a “meltdown.”

The number of coronavirus cases is rising and differences between Republicans and Democrats is hindering another stimulus package. As a result, most analysts have ruled out the possibility of a V-shaped recovery.

Therefore, analysts believe that the bank will leave rates unchanged and use the meeting to set the stage for more actions in September. Some of these future actions could be yield curve control and more asset purchases. As a final resort, the bank may also implement negative rates in the country.

USD/SEK technical analysis

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The weekly chart shows that the USD/SEK pair has been in a strong downward trend. The price is below the 50-day and 100-day exponential moving averages. Also, the RSI has fallen to the lowest level since January 2018. The price is also slightly below the 61.8% Fibonacci retracement level. Therefore, the pair is likely to continue falling as bears target the next resistance at 8.500.

SEK Forex