Danske note poor risk sentiment amid an.......>

FOREX: Danske note poor risk sentiment amid an escalating trade war and poor

macro data have weighed heavily on the SEK recently, with EUR/SEK up 2.5% since

the 25 July trough at 10.49. Next technical resistance is seen at 10.80 and

10.85 (both local highs from May). At the same time RSI has reached stretched

levels, which may suggest a pause. Next week's CPI data may be a positive,

albeit temporary, relief for the krona as our forecast is above the Riksbank's.

Today's production data are very volatile on a monthly basis and should thus be

taken with a grain of salt, but may nonetheless have some market impact. More

generally, we stick to our bullish medium-term view on EUR/SEK.

We have revised lower our EUR/USD forecast to 1.10 in 1M and 3M and 1.13 in 6M

and 1.15 in 12M as we have become less convinced that the Fed will get ahead of

the curve in the short term in terms of easing monetary policy and weakening the

USD. Furthermore, we expect further JPY strength and now forecast USD/JPY to

fall to 105 in 3M. In addition, note that we now forecast a move in USD/CNY to

7.20 in 6M and 12M. However, we do not expect China to turn to devaluation as a

weapon in the trade war.