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Daily Market Analysis and Forex News

USDSEK: Golden cross on the horizon?

  • USDSEK jumps on Riksbank cut
  • Currency pair in megaphone pattern
  • Key point of reference at golden 161.8 Fib level
  • Potential golden cross on horizon
  • Other key levels at 11.0678 and 10.8333

The USDSEK punched above 10.9 on Wednesday after Sweden’s central bank cut rates for the first time in eight years!

In an expected move, the Riksbank trimmed its policy rate by 25 basis points to 3.75% and signalled two more cuts in the second half of 2024. This makes Sweden's Riksbank the second major one after the Swiss National Bank to cut interest rates.

As of writing, traders see a 67% probability of another 25 basis point Riksbank cut by June with this fully priced in by August.

The Riksbank dovish stance contrasts with the US Federal Reserve which has struggled to cut rates in the face of sticky inflation.

Incoming data from the US this week is likely to influence bets around when the Fed will join the rate cut club.

At 12:30, GMT, the Unemployment claims data out of the US is expected to show 210,00 individuals filed for unemployment for the first time during the past week. If so, this will signal a relatively healthy labor market and continue to weaken bets of near-term rate cuts.

Technically speaking,

USDSEK is in a broadening pattern, also known as a megaphone.

In a broadening pattern, price peaks and valleys, are bounded by two diverging trendlines.

USDSEK is in a 3-day rally (coming off the support of the megaphone) and may be heading for the upper trendline of the pattern at 11.0678.

Golden cross on the horizon?

Interestingly, the 50-day SMA is close to crossing above the 200-day SMA.

This price phenomenon is called a “golden cross” and is used as an early “warning” sign to show that price could rally further.

When we add the Fibonacci retracement tool, drawn from November 30th 2023 high (10.5387) to December 27th 2023 low (9.9043), we see 10.9309 at the golden fib (161.8%)  ratio acting as resistance and a point of reference.

A strong close above this level may open the floodgates for USDSEK bulls (those looking to see the exotic pair rally).

However, USDSEK bears (those looking to see a decline in the pair) will have their eyes set on the following levels.

  • 10.8333: the 21-day SMA

  • 10.7079: the lower trendline of the broadening pattern

Finally, the Relative Strength Index, - an indicator that shows overbought and over-sold zones- is above the 50-point mid-way line and pointing upwards towards the overbought zone, signaling a bullish sentiment in the asset.


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