US dollar bounces against Swedish krona

Kate Leaman
Kate Leaman

2 July 2019

The US dollar had a strong Monday session against the Swedish krona, as perhaps people are starting to see more value in the US stock markets in comparison. After all, the US stock markets are at all-time highs, or at least the S&P 500 is, while the rest of the stock markets around the world continue to struggle. Keep in mind that the Swedish krona is quite often thought of as a “risk on” currency, with a particular slant on technology. Keep in mind that the NASDAQ 100 has been struggling a bit, so it makes sense that the US dollar would continue to grind a bit higher against it.

Confluence of support

usd/sek chart

USD/SEK chart

We had a nice confluence of support on Monday, featuring the 200 day EMA which had been supported in the market for several days in a row. Ultimately, we broke above several long wicks which of course is a bullish sign in and of itself. We also have the 50% Fibonacci retracement level at the 9.25 SEK handle. All of these things together make a good argument for potential support, and we did in fact see just that very thing present itself. Now that we have seen the support show itself, it looks as if the longer-term uptrend could very well continue to push this market to the upside.

Bullish candle

The trading session on Monday featured a strong bullish candle that reached towards the 9.35 SEK handle, enclosed towards the top of the range. That is a good sign obviously, so at this point it’s going to be interesting to see whether or not we can continue the momentum. The bullish candle should feature a lot of support within itself, so even if we do get a bit of a pullback we should see buyers come back, something that we have already started to notice mid-day on Tuesday.

Breaking above the top of the candle could continue to throw bullish pressure in this market and reaching towards the 9.5 SEK level above which is the next major psychologically important target. At this point, the 50 day EMA could also come into play, but quite frankly that will probably be a minor annoyance more than anything else.

The trade ahead

Looking at this chart, I believe that the trade ahead is simply to look for value in the US dollar against the Swedish krona. Ultimately, there should be plenty of value within the massive reversal candle that we formed on the trading session on Monday, so looking for short-term pullbacks should be the best way to take advantage of this reversal. Alternately, if we break above the Monday session without a pullback, that’s also a buying opportunity as well.

The alternate scenario is that we break down below the 200 day EMA, which is an extraordinarily bearish sign. At that point I would not hesitate to start shorting the quite frankly I believe that the buyers are taking a statement and should continue to push to the upside.

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