USD/SEK targets 8.7 as Sweden Covid-19 daily cases jump to June highs
- The USD/SEK pair dropped slightly as traders reacted to the rising number of Covid-19 cases in Sweden.
- The pair has been in a significant dip since September, when it reached a high of 9.15.
- It will react to the Swedish industrial production data later today.
The USD/SEK pair is down by 0.10% today as the number of Covid-19 cases continues to rise in Sweden and the rest of Europe. It is trading at 8.7385, which is slightly below the Friday’s high of 8.7937.
Swedish Covid-19 cases rise
Sweden has made headlines in the past few months because of its response to the coronavirus pandemic. The country decided not to impose any lockdowns as its neighbours were doing. As a result, it reported more than 111k cases and more than 5,933 deaths.
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Now, the country is contending with another wave of the virus as the number of cases rise. Yesterday, it confirmed more than 1,255 new cases, which is the highest figure since June this year. Worse, as you can see below, the number of cases has been in a slow upward trend in the past few weeks.
The new cases risk halting the recent growth in the country. Recent data showed that the manufacturing and services PMI numbers remained above 50 for the third consecutive month. The unemployment rate dropped from 8.8% to 8.3% while industrial production bounced back by 7.8% in September.
Inflation, however, has been relatively low, with the headline CPI rising by 0.4% and CPI at constant interest rates rising by 0.3%. The country’s statistics office will release the household lending growth and trade numbers later today.
Another challenge for the Swedish economy is that its neighbouring countries have seen a spike in infections. Norway, its neighbour, has seen cases jump, which has forced the government to restart some of its restrictions. The same is happening in countries like Germany, France, Spain, and Italy. The consequence for this is that demand for Swedish goods will be affected, at least in the near term.
All this also points to Riksbank, the oldest central bank in the world. As part of its recovery efforts, the bank has lowered interest rates to zero and put in place more measures. For example, it has provided banks with more liquidity to support lending. If the situation worsens, it increases the possibility that the bank will move back to negative interest rates later this year or in early 2021.
USD/SEK technical outlook
The four-hour chart shows that the USD/SEK price has been in a sharp downward trend since September when it peaked at 9.1622. Since then, the pair has retraced close to 78.6% of its moves and is trading at the lowest level since September 10. The price has also moved below the 25-day and 15-day exponential moving averages. Therefore, at this point, the path of least resistance for the pair is lower, with the next support level being 8.700. Get started in trading with our free forex courses.