USD/SEK fell sharply during the European morning Thursday after data showed that the Swedish economy expanded twice as fast as the consensus suggested. Specifically, Sweden’s GDP grew +1.2% qoq in Q4 from an upwardly revised -0.1% in Q3, beating estimates of +0.6%. This drove the yoy rate up to +2.4% from +1.5%, and it may have revived bets that the Riksbank will indeed follow through with its plans to push the hiking button again later this year.
From a technical standpoint, the slide in USD/SEK led to a break below the upside support line taken from the low of January 11th. This, combined with the fact that the rate is also trading below a short-term downside resistance line drawn from the peak of February 19th, paints a bearish picture in our view, at least with regards to the short term.
At the time of writing, the rate looks to be heading towards the 9.1835 support zone, defined by the low of February 13th, the break of which may open the path towards the 9.1400 area, marked by the inside swing high of February 5th. If that level fails to stop the bears from pushing the battle lower, then we may experience extensions towards the 9.1000 key obstacle, which proved a strong resistance from mid-December until it was broken on February 4th.
Turning attention to our short-term oscillators, we see that the RSI slid and just touched its toe below 30, while the MACD continues to run below both its zero and trigger lines, pointing south as well. These indicators suggest strong downside speed and corroborate the case for some further declines.
Even if the rate rebounds from current levels, as long as it remains below the aforementioned lines, we would consider the outlook to still be negative. We would like to see a clear and decisive rebound above 9.2970 before we start examining the bullish case. Such a recovery would bring USD/SEK back above both diagonal lines and could set the stage for extensions towards Tuesday’s high, at around 9.3350. Another break, above 9.3350, may encourage the bulls to put the 9.3750 zone on their radars. That zone stopped the price from moving higher on February 21st.
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