USD/SEK forecast after the strong Sweden GDP data
- The USD/SEK pair declined to the lowest level since July 12.
- The decline happened after the strong Sweden Q2 GDP data.
- It also happened after the Federal Reserve delivered its rate decision.
The USD/SEK declined to the lowest level since July 13 after the relatively strong Swedish GDP data and the mild Federal Reserve. The pair dropped to 8.5700, which was about 1.87% below this month’s high of 8.7347.
Sweden GDP data
The Swedish economy bounced back in the second quarter as local and international demand rose. According to Statistics Sweden, the country’s economy rose by 09% in the second quarter after rising by 0.8% in Q1. This recovery was slightly better than the median estimate of 0.7%. The economy rose by 10% on a year-on-year basis. In a statement, Melker Loberg, an economist at the bureau said:
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“Year on year growth rates are the highest we currently have in our time series on Swedish GDP. This should be seen in the light of the severe economic effects of the pandemic on the economy in the second quarter last year.”
Recent numbers from Sweden have been relatively strong. For example, the country’s industrial production rose by 24.2% in May while the headline consumer price index rose by 1.3% in June. This was a slight decline from the previous month’s 1.8%. The producer price index (PPI) rose from 7.9% to 9.6% while retail sales rose by 8.5%. However, the unemployment rate rose from 9.8% in May to 10.3% in June.
The USD/SEK also declined because of the overall weaker US dollar. Indeed, the dollar index retreated by more than 0.10% as investors reflected on the latest Federal Reserve interest rate decision. The bank decided to leave its interest rate decision unchanged. It will also deliberate on tapering of asset purchases in the December meeting. There are also signs that the Riksbank will sound more hawkish in the coming meetings.
The 4H chart shows that the USD/SEK indicator formed a double-top pattern at 8.7320 mid this month. It then started moving in a downward trend and fell below the 25-day and 50-day exponential moving averages (EMA). The Stochastic Oscillator has also moved to the oversold level. Additionally, the pair moved below the 23.6% Fibonacci retracement level.
Therefore, the pair will likely maintain the downward trend as bears target the 50% retracement level at 8.4840. This prediction will be confirmed if the price manages to move below the 38.2% retracement level at 8.5242.
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