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USD/SEK: Fundamental Review & Forecast


Published on: 07/11/2018



The USD/SEK rates haven't changed significantly over the last month. We can still see a rapid upward trend, with no signs of completion. The USD continues to be supported by strong macroeconomic statistics, while in Sweden there is a slowdown in economic growth, as well as in the EU as a whole.

The situation this week is different from usual. There is a strong political component which negatively impacts the value of the USD. Investors around the world were waiting for the results of the midterm elections in the USA - the Senate and the House of Representatives. The crucial importance of these elections was the likely weakening of President Donald Trump's position and even his probable impeachment, if the Democrats get a majority in the Senate and the House of Representatives. According to the preliminary results of the elections, the Democrats received a majority in the House of Representatives, while the Republicans retained a majority in the Senate. Such results, according to analysts, preserve the power of Donald Trump, but make it even weaker than it is now, which does not allow Donald Trump to freely implement his reforms. Following the election, the USD decreased in value against most currencies.

As for the situation in the US economy, in general, rapid economic growth continues. According to the latest data, the unemployment rate remains the lowest for the last 49 years for the second month in a row. However, the growth of imports to a record level raises fears about exceeding the allowable trade deficit in the future. Nevertheless, the FED is optimistic about the economic situation and has repeatedly made it clear that an aggressive monetary policy justifies itself and will continue according to the plan. By the way, the next Federal Reserve meeting will be held today. Investors do not expect a rate hike this time, but expect confirmation of the commitment to the current monetary policy, despite the criticism of Donald Trump.

The situation in Sweden matches the situation in the EU. Recent economic reports show a slowdown in economic growth. Industrial production in Sweden rose 1.7% in September, but this is the weakest growth since April last year. The PMI index in the services sector fell by 0.3 pips in October, but it is the lowest since August 2017. The Manufacturing PMI index also fell by 0.2 pips.

USDSEK, daily
In the near future, we can expect a decrease in volatility on the market. Such temporary factors as the results of the US elections will be taken into account and will no longer affect the rates. In any case, despite the presence of new factors this week, the situation on the chart is standard: after the next growth a price correction has begun, which can decrease the rates even closer to the support line than now. However, this price correction is close to completion. When that happens we can expect the dollar to recover its positions within the current trend. Therefore, the deals to BUY in the medium term can be considered as the most effective, which is also confirmed by the Stochastic oscillator.


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