The USD/SEK pair fell rather hard during the course of the day on Tuesday, which is something that I’ve been waiting for. While the US dollar does seem to be favored in general, we are seeing quite a bit of volatility and a possible trend change against many currencies. I believe that the Swedish krona may be one of them, as we are approaching a very significant weekly trend line as seen on the attached chart. The problem with trend changes is that they tend to be very messy affairs, and I think that’s basically what we have been seeing lately.
Ultimately though, I am going to be fairly conservative when it comes to shorting this market. I need to see at the very least a daily close below the uptrend line, and quite frankly I’d really like to see a move below the 8.15 level before I started selling. However, I am very cognizant of the fact that the downside is massive if we do break down a bit.
US dollar weakness
I don’t know if we are starting to see the overall reaction to the Federal Reserve not raising rates are wide, but it does appear that the US dollar is certainly on its back foot. Quite frankly, I think that the US dollar has been overbought for some time, but at the same time you can’t really justify owning another currency on its own merits. With this, we may be entering a corrective phase, and the Swedish krona has been absolutely pummeled against the US dollar for some time.
If we can break down below the aforementioned 8.15 handle, I think that the 8.00 level may be possible. I know this is a longer-term call, but quite frankly I feel that we could easily do that. On top of that, I think we could even reach a 7 handle before it’s all said and done. Because of this, I am willing to be very patient when it comes to selling this particular pair.
