IronFX Essential Intraday Comment | 04/05/2015

Intraday Comment
04.05.2015, 2pm

The dollar traded lower or unchanged against most of its G10 counterparts during the European morning Monday. It outperformed only EUR and CHF. The dollar was lower against SEK, CAD, NZD and NOK, in that order, while it traded virtually unchanged against AUD, GBP, and JPY.

The Swedish Krona was the main gainer against the greenback following the rise in Sweden’s manufacturing PMI for April. The index rose to 55.7 from 54.1 in March, beating expectations of a decline to 53.0. The release added to Krona’s rally that was triggered last week by the Riksbank’s unexpected decision to leave its official cash rate unchanged. However, the former Finance Minister of Sweden, Anders Borg, said today that there is a “significant risk” that SEK can appreciate more than the economy can bear and urged the central bank to intervene in such a case. Borg’s view is in line with the Riksbank’s stance, which does not like a strong Krona as it could send Sweden’s inflation rate back into deflation. Therefore, I would consider the recent strength of SEK to be temporary and to provide renewed selling opportunities in the near future.

USD/SEK traded lower during the European morning Monday, after hitting resistance at 8.4200 (R1). After the completion of a head and shoulders formation on the 28th of April, the pair collapsed, but found solid support near the longer-term trend line taken from back the low of the 14th of April. As long as the rate is trading above that trend line, I would consider the overall path of the pair to be positive and the recent declines following the head and shoulders as a corrective move. A clear move above 8.4200 (R1) is likely to confirm the rebound from the longer-term trend line and perhaps challenge our next resistance at 8.4750 (R2). Our short-term oscillators support the case for a forthcoming positive wave, The RSI rebounded from its 30 line, and now lies slightly below its 50 line. It could cross above it soon, while the MACD has bottomed and crossed above its trigger line.

• Support: 8.3650 (S1), 8.2700 (S2), 8.2250 (S3).

• Resistance: 8.4200 (R1), 8.4750 (R2), 8.5360 (R3).

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