USD/SEK: Swedish krona spikes but bearish risks remain

The USD/SEK price retreated after the relatively strong economic data from Sweden and the performance of the US Treasuries market. The pair dropped from this week’s high of 8.5962 to 8.5150.

Strong Swedish economic data

The Swedish economy started the year well, according to data by the country’s statistics agency. Last week, data revealed that total orders increased by 0.6% in January from December. This led to an annualised rate of 8.5%, helped by transport equipment demand. 

Further data revealed that household consumption, the biggest GDP constituent, increased by 1.8% in January. Nonetheless, the consumption was still 5.4% below the same period in 2020.

Last week, manufacturing and services PMI showed that the situation is improving. In total, the country’s manufacturing PMI increased to 61.9 in February, the 9th straight month of expansion.

And today, the USD/SEK declined as forex investors reacted to further positive data. Sweden’s industrial production increased by 0.1% in January. This led to an annualised decrease of 2.9%. This performance was mostly due to an increase in private sector development.

Meanwhile, the USD/SEK is also falling because of the relatively weak US dollar. After rising for several consecutive days, the US dollar index declined by 0.40% today as the yields cooled-down. As shown below, the yields on the 10, 30, and 5 Treasury bonds declined by more than 2% today.

Analysts are now waiting for the signing of the $1.9 trillion stimulus package. Also, tomorrow, the pair will react to the latest US inflation numbers and the upcoming meeting of the European Central Bank (ECB).

USD/SEK technical outlook

The Swedish krona has been on a steep downward trend recently. The pair reached a high of 8.5962 yesterday. 

Today, it declined to 8.5150, which is along the lower line of the ascending channel. The price is also slightly above the lower line of the Donchian Channels. At the same time, the money flow index (MFI) has declined from the overbought zone of 84 to the current 30. 

Therefore, while the USD/SEK may continue to fall, there is a possibility that bulls will start to buy the dips as they attempt to retest the upper side of the channel at 8.60.