Sweden's Riksbank Leaves Rates Unchanged

The Riksbank met earlier today and left rates unchanged at 0%, as expected. Sweden’s central bank was one of the first to exit from negative rates at their last meeting on December 19th, 2019. Members said that inflation and growth are in line with previous expectations, however, they did note that inflation may be lower than previously forecast due to falling energy prices. They also reiterated that rates will remain at 0% for the forecast period.  (Lower for longer!)

USD/SEK has been trading in an uptrend since early 2018 from a low of 7.7282 to October 2019 highs at 9.9644. Price broke lower through the upward sloping triangle to 9.2942 in December 31st and bounced.USD/SEK appears to be trying to put in the right shoulder of a head and shoulders formation, as it is near the underside of the previously mentioned trendline which comes across near 9.7500.  It is also trading slightly above the 200-day moving average, which comes across near 9.5691.  Although this is a bit premature, if price does indeed trade lower and forms a head and shoulders pattern, the price target would be somewhere near 8.6000, depending on where price breaks the neckline. 

(Click on image to enlarge)

Source: Tradingview, FOREX.com

USD/SEK is often used as a predictor of the US Dollar. Currently, the Correlation Coefficient has moved off its highs near .96 to .70. A correlation coefficient of +1.00 means that the two assets are perfectly correlated and move together 100% of the time.A correlation coefficient of -1.00 means that the two assets are perfectly uncorrelated and move in opposite directions 100% of the time. If USD/SEK does move lower, and its correlation coefficient remains at current levels or better, then the DXY may reverse its current strong move higher and begin to move lower as well.

(Click on image to enlarge)

Source: Tradingview, FOREX.com

In addition, on a 240-minute timeframe price has been moving lower from recent highs near 9.6844. If price continues lower and takes out February 5th lows near 9.5502, USD/SEK will form a double top. The price target will be near 9.4100.

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