USD/DKK forms descending triangle as Denmark inflation slips

The USD/DKK exchange rate moved sideways on Monday as investors react to the latest Danish consumer price index (CPI) data. The pair retreated to 6.80, lower than the year-to-date high of 7. It has dropped by more than 12% below the highest point in 2022.

Denmark inflation slips

Consumer prices in Denmark are retreating after surging to 8.9% during the pandemic. The headline consumer price index has dropped in all months since November last year. It moved to a low of 2.9%, the lowest level since January last year.

Consumer inflation rose by 0.30% from a month earlier while the closely watched harmonised CPI dropped from 2.90% in May to 2.40% in June. Inflation dropped mostly because of the falling electricity, gas and food prices.

Danish inflation has dropped because of the rising interest rates in the country. The Danish central bank decided to hike interest rates by 0.25% in June. It moved rates from 2.85% to 3.1%.

The Danish central bank tends to match actions of the European Central Bank (ECB), which has delivered numerous hikes recently. Therefore, there is a likelihood that the bank will deliver another increase later this month.

Economists expect that the Danish economy will slow down in the second half of the year as domestic and regional demand softens. The economy softened by 0.1% in the first quarter.

USD/DKK technical analysis

USDDKK chart by TradingView

The USD to Danish krone has been in a downward trend in the past few months. It has fallen by over 12% from its highest level in 2022. Along the way, the pair has moved below the 25-day and 50-day moving averages.

The USD/DKK pair has dropped below the descending trendline shown in black. This trendline connects the highest level since November last year. It is also the hypotenuse of the descending triangle pattern. The lower side of the pattern is at 6.7383.

Therefore, the pair will likely continue falling if bears manage to move below the support at 6.7383. If this happens, the next level to watch will be at 6.60.