USD/DKK: Danish krone is on the cusp of a bullish breakout

By:
on May 8, 2023
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  • The USD/DKK exchange rate is sitting at an important support level.
  • The Danish central bank decided to hike rates by 0.25% last week.
  • Danish industrial production slipped by 2.3% in April.

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The Danish krone continued rallying on Monday even after the relatively weak industrial production data. The USD/DKK pair dropped to a low of 6.73, the lowest level since April 2022. It has crashed by over 13.50% from the highest level in 2022.

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Danish industrial production

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The USD/DKK exchange rate has been under pressure as the US dollar index (DXY) continued dropping. On Friday, the Danish central bank raised interest rates from 2.65% to 2.85% in a bid to meet the rate hike by the European Central Bank (ECB). 

This rate hike means that the central bank has now increased rates in all the past seven meetings. In a statement, analysts at Nordea wrote that:

“The pressure for a stronger Danish krone could easily re-emerge forcing the central bank to do more intervention and possibly also to widen the interest rate spread to the Euro area even further.”

The decision by the central bank came two days after the Federal Reserve decided to hike interest rates by 0.25%. In his statement, Jerome Powell did not rule out further tightening in the coming months.

The USD/DKK pair also retreated after the relatively weak Danish industrial production numbers. According to the statistics agency, industrial production dropped by 2.3% in April after growing by 5.1% in March. Industrial production had crashed by 7.6% in February.

The next key USD/DKK news will come from the United States, which will publish the latest consumer price index (CPI) data. Economists believe that the country’s inflation eased slightly in April as gasoline prices eased.

USD/DKK technical analysis

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USD/DKK

USD/DKK chart by TradingView

On the daily chart, we see that the USD/DKK exchange rate has been in a strong bearish trend in the past few days. It has managed to move to the 61.8% Fibonacci Retracement level. The pair has also dropped below the 50-day and 25-day moving averages. 

Most importantly, it is sitting at an important support level, which is the lowest point on February 6. Therefore, there is a likelihood that the pair will have a bearish breakout as sellers target the next key support point at 6.60. A move above the resistance point at 6.9 will invalidate the bearish view.

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