SEK predictions for 2017

The Swedish krona is a very interesting currency for Forex traders because it provides the much needed volatility coupled with a sense of stability. Both of these factors are crucial because the former ensures there is movement in price with the latter keeping movements in check to avoid any surprises.

In 2013, the Bank for International Settlements (BIS) together with the website placed the SEK at 11th position among the world’s most traded currencies. For this reason, it is essential that we look at how the currency is expected to perform in 2017. The same BIS report also showed that the USD/SEK was the most heavily traded pair, so we’re going to focus on that.

SEK predictions

Recent performance

The krona ended 2016 severely weakened against the US dollar at a rate just below 9.5, which had not been seen since the global financial crisis in 2008. The final push was obviously caused by the dollar’s strength following the presidential elections, but there was also increased weakness from Sweden. Sweden’s central bank, Riksbank, decided to leave the interest rate at -0.5% despite experts’ belief they would raise rates. Given the steady growth in GDP throughout 2016, most experts believed the rates would have been reduced. The dovish sentiment of the Riksbank instead caused the krona to slide to near decade lows.

However, starting this year, Riksbank began showing signs of a rate hike when talk of ending monetary easing spread. The krona subsequently strengthened against the US dollar, pushing the rate below 9 and almost resuming last year’s rates. Back in October, Riksbank had extended the quantitative easing policies by 6 months, and the expectation was that the interest rate would finally be raised. Again, on May 19th, the central bank remained dovish and again, the krona slid against the US dollar.

Outlook for the rest of the year

The fundamental data in Sweden shows growth in most sectors, which has analysts again believing in a 2017 rate hike. Inflation has remained above 1% for the first 5 months of 2017, reaching a high of 1.9% in April. Riksbank currently has its goal set at 2%, and the central bank may not increase interest until they reach that target. Riksbank also decided not to raise the repo rate until mid-2018 to help increase inflation. Carry trade is also helping to increase inflation since the krona is becoming a choice currency for foreign assets purchase.

Therefore, fundamentally speaking, the SEK may remain weak for the rest of 2017 until Riksbank finally ends its QE program. On the technical side, a look at the USD/SEK daily chart shows the pair trending below the 200-day SMA, and other technical indicators also show the pair in overbought territory. There is strong support at 8.65 which is expected to hold the pair, and although most of the technical signs are bearish, the fundamentals point to a sideways movement.

It will take a very big push to strengthen the krona below the support level, and there isn’t any such news in the horizon. Thus, any we recommend waiting before making any long-tern trades on the krona. In the short-term, though, we expect the krona to gain a bit of strength following the positive economic data.

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