Talking Points:
- 61.8% Retracement from October High
- Testing Broken Trend Line Resistance
- Potential Short Set-up in USD/SEK
The US dollar (USD) has retraced 61.8% of the leg down against the Swedish krona (SEK) since the October high just above 6.70 level. Now, USDSEK is facing a lot of resistance just below 6.60, including the long downward trend since the peak in April of last year and the shorter, positive trend line, which was broken in December.
See recent: A ”Make-or-Break” Scenario for USD/SEK
Once again, we do see a slight pullback in USDSEK from the downward trend line, which has acted as resistance several times since the peak above 6.85 in April 2013. Furthermore, USDSEK broke its shorter, positive trend line in December, which is now being tested from below, as seen on the chart.
Guest Commentary: Technical Outlook for USD/SEK
Support: 6.45, 6.37-6.30, 6.30
Resistance: 6.60, 6.70, 6.85
In addition to the trend line that’s now being tested as resistance, USDSEK has also retraced 61.8% of the move down from the October highs. With all these levels around 6.60, the pair is very likely to either continue the shorter-term downtrend (in place since October) by making lower highs and lower lows, or put in a decent pullback in order to build up more momentum and potentially break the current resistance area.
The level to watch on a possible pullback is the support zone between 6.50 and 6.45. However, 6.45 remains the critical support level in USDSEK. A break below this level will suggest a new test of the 6.30 area.
To the upside, we need to break 6.60-6.65 and hold above this area to attract further upside. If so, we might revisit the 2013 highs around 6.85.
Potential Short Trade in USD/SEK
Using half the desired position, short USDSEK at current levels (6.55-6.60), and traders can then add to the short position if/when we see a bearish reversal signal on the chart. The stop-loss should be executed if USDSEK closes above 6.65 on the daily time frame.
There are two price targets for this trade, the first one being the critical support area around 6.45. If this target is reached, take 50% off the table and put a stop loss on the average price, looking for further downside to our second and final price target around 6.30.
By Rafiul Hossain, Guest Analyst, DailyFX.com