SEK
Bearish conditions for USDSEK have been affirmed by the 1.8% decline over the past two sessions, with the 50-day EMA continuing to cap the price action well. Spot hovers just above key pivot support around 10.1500, which was last tested in late-August and has proved a significant inflection point across the past 2 years (see chart).
- US developments are set to remain dominant next week and Danske Bank currently view the Fed decision as SEK neutral, assuming a 25bp cut is delivered. However, they outline two scenarios in the event of a surprise 50bp cut:
- “Either 1) it is seen as a gift to the equity market that Fed cuts that much despite a still solid economy, supporting the SEK through both the rates and risk-channels, or 2) markets start to fear that the Fed knows something they don’t, yielding a risk-off impulse that instead hurts the SEK”.
- Scenario (1) would put 10.1500 firmly into view, a breach of which would expose support at 9.9100 (the December ’23 low). Alternatively, the 50-day EMA would provide initial resistance should Scenario (2) prevail.
- Next week’s Swedish calendar includes the August labour force survey. However, this is unlikely to move the needle ahead of the Riksbank’s Sep 25 decision, with a 25bp cut well priced at this stage.
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