USD/SEK is moving higher and has far more upside in our view. In our recent article, we expected the USD to bottom out at 10.20, we are now at 10.50 and could trade as high as 11.50 longer term in our view.

Sweden's interest rate is currently 3.75% which is below US rates which are well above the 5.00% level. The USD has an advantage in rates and also in terms of economic growth the US economy is less reliant on exports than Sweden and growth is stronger in the US...

Sweden Economy in Recession and More Downside to Come 

In terms of the Swedish economy, it's already in recession and for anyone trading EUR/USD note that the eurozone normally follows Sweden in terms of economic activity. GDP for Q2 fell by 1.5% on the quarter, which was much weaker than the Riksbank’s expectations. The Q2 GDP flash estimate was at -1.5% q/q and -2.4% y/y.

Today we had manufacturing PMIs The manufacturing PMI rose to 47.6 in July from 45.2 in June. Despite the rise, the PMIs going up the manufacturing industry is in recession. The slowdown in the manufacturing industry is a global phenomenon. The strong demand for goods is over and world trade of goods is falling lower which is hitting Sweden's export-led economy hard. Sweden is one of the most sensitive currencies to global expansion and contraction in the global economy and more weakness in the economy is expected.

Also, the consumer is under pressure, and retail sales fell by 0.3% in the month of June, which is probably the end of the rebound in the last two months.

There is also a housing crisis in Sweden which is weighing on the consumer. The outlook for businesses and consumers is bleak in Sweden and we expect the USD to continue to gain traction to the upside in the coming weeks with pullbacks being buying opportunities.

Technical Analysis

Below we have outlined our targets on the monthly chart and also key support which is the same as on the daily chart which is also below.