USD/SEK Looks Set For Major Breakout Before FOMC Meeting

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US Dollar (USD) rose broadly against the Swedish Krona (SEK) on Thursday to close inside the upward slope channel which emerged on the daily chart last month. The pair looks set for a bearish breakout to resume the long-awaited correction phase. The sentiment is however bullish and will remain bullish as far as the 6.3209 support area remains intact.

Technical Analysis

USD/SEK is being traded near 6.5719 at 10:00 GMT in London. A support may be noted around 6.5711 that is the trendline support. A break and daily closing below the trendline will push the pair into negative territory, opening doors for a deeper correction below the 6.4733 support area which is the 50% fib level.

 

On the upside, the pair is expected to face a hurdle near 6.6257 that is the swing high of the previous wave ahead of 6.6336, the channel resistance as demonstrated in the above chart. A daily closing above the channel resistance will incite a renewed buying interest, threatening the 7.0000 milestone in the long run.

Producer Price Index

On Monday, April 28, Statistics Sweden is due to release the Producer Price Index (PPI) report. According to the median projection of different economists, the PPI jumped by 0.95% in March as compared to 0.10% increase in the same month of the year before, better than expected actual reading will be seen as bearish for USD/SEK and vice versa.

Retail Sales

The Statistics Department of Sweden will also release the retail sales report on Monday. According to the average forecast of different economists, the retail sales increased by 3.16% last month as compared to 2.5% increase in the same month of 2013, better than projected actual outcome will be seen as bearish for USD/SEK and vice versa

FOMC Meeting

On Wednesday, the Federal Reserve will announce its decision on the cash rate and asset purchase program following the two-day Federal Open Market Committee (FOMC) monetary policy meeting in Washington. Many economists believe that the US central bank will announce more trimming in the stimulus by $10 billion to $45 billion a month.

The central bank is however expected to keep the benchmark interest rate unchanged at the record low level of 0.25%. Moreover, investors will also analyze the monetary policy statement very carefully to gauge the future monetary policy outlook of the world’s largest economy. The tapering decision on Wednesday might spur huge bullish momentum in the price of USD/SEK.

Trade Idea

Keeping in view the overall fundamental and technical outlook, it is preferred to sell the pair on a daily closing below the trendline resistance, the stop might be placed 50 pips above the trendline resistance while the target should be around 200 pips.

To contact the writer of this story: Usman Ahmed at usman@forexminute.com