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Intraday Comment – USD/SEK

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The dollar traded mixed against its major counterparts during the European morning Tuesday. It was higher against JPY, NOK and AUD, in that order, while it was lower against SEK and GBP. The greenback remained stable vs EUR, CHF, CAD and NZD.

Swedish krona surged after the country’s CPI fell 0.1% yoy in October, a slower pace of deflation than -0.4% yoy previously and also slower than the forecast of -0.2% yoy. At the same time, the minutes from Sweden’s central bank latest policy meeting showed that further measures are possible if inflation remains subdued and below the Bank’s 2% target. The board members acknowledged the low inflationary pressures and revised down their CPI outlook compared to September’s meeting. They expect inflation to reach the 2% target during the first half of 2016. However, I would point out that even though October’s CPI fell at a slower pace than in September, it still recorded deflation for the 8th time this year. On top of the Riksbank’s downward CPI revision and the high possibilities for further stimulus, I expect weakening fundamentals to weigh on the currency and increase selling pressure on SEK.

USD/SEK moved lower during the European morning following the above expectations CPI reading. At midday in Europe, the pair is heading towards the black uptrend line and the 50-period moving average that provided a good support to the lows in the recent past. On the 4-hour chart, the RSI crossed its 50 line and is pointing down while the MACD crossed its trigger line and moved down. These momentum signs indicate that further decline is possible, at least towards the black line. Thus I consider the near-term bias to be negative. A break below the black uptrend line could trigger further extensions towards our 7.3400 (S1) support line. In the bigger picture though, as far as USDSEK is still printing higher peaks and higher troughs above the blue longer-term trend line taken from back at the low of the 19th of March, the overall path of the pair is to the upside, in my view.

• Support: 7.3400 (S1), 7.2900 (S2), 7.2200 (S3) .

• Resistance: 7.4500 (R1), 7.5000 (R2), 7.5900 (R3) .

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