USD/SEK forecast as Swedish krona meltdown accelerates

The USD/SEK price surged to an all-time high even after the strong Swedish consumer inflation data. The pair jumped to an all-time high of 10.58, meaning that it has jumped by over 16% this year alone. The Swedish krona has fallen by about 25% in the past 12 months.

US and Swedish inflation surging

On Wednesday, the American Bureau of Labor Statistics (BLS) said that the country’s consumer inflation surged to 9.1% in June of this year. This was the biggest increase in over 41 years. Beneath the headline number, the BLS said that the cost of energy, food, and housing continued surging.

Inflation is surging in other countries as well. On Thursday, data by the Swedish statistics agency said that the country’s headline inflation surged from 1.0% in May to 1.2% in June. This increase translated to a year-on-year gain of 8.7%, the highest level the country has recorded in the past few decades.

Further data showed that consumer inflation at constant interest rates rose from 7.2% to 8.5% on a year-on-year basis. This increase was better than the median estimate of  8.1%. Meanwhile, the country’s unemployment rate remained unchanged at 6.6%.

Therefore, analysts believe that the Federal Reserve and the Riksbank will now embrace a mre hawkish tone. The Federal Reserve has already hiked interest rates by 150 basis points in the past few months. Now, analysts expect that the bank will hike interest rates by a giant 100 basis points.

Similarly, Riksbank has embraced a hawkish tone. In June, the bank surprised the market when it decided to hike by 0.50%. It also signaled that it will hike by a similar or bigger rate in the upcoming meeting in September. Other banks that have hiked massively recently are the Bank of Canada and the Reserve Bank of New Zealand.

USD/SEK forecast

The daily chart shows that the USD/SEK pair rose to an all-time high of 10.70 this week. The price has moved to the upper side of the ascending channel. It has also moved above the 25-day and 50-day moving averages while the Relative Strength Index (RSI) has moved to the overbought level.

Therefore, the pair will likely continue rising as bulls target the next important resistance point at 11.0. A drop below the support at1.40 will invalidate the bearish view.