The USD/SEK pair was little changed on Tuesday morning as investors waited for the upcoming interest rate decision by the Riksbank. It is trading at 9.133, where it has been in the past few days. The price is about 3.65% below the highest level this year.
Riksbank preview
The Swedish economy has done relatively well this year as the country continues to reopen. Recent data showed that the country’s unemployment rate has declined modestly in the past few months while inflation has held steady.
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Like all other countries, the economy is going through some challenges that have affected its output. For example, the supply chain disruptions and Omicron helped to push the Swedish industrial production significantly lower in December.
The next catalyst for the USD/SEK pair will be the upcoming Swedish unemployment rate and Riksbank interest rate decision scheduled on Thursday. Analysts expect the data to show that the country’s unemployment rate declined from 7.2% to 7.0% in January.
Analysts will be focusing on the upcoming Riksbank decision, which will be more interesting because of the hawkish tone of the European Central Bank (ECB). This decision will come at a time when wages negotiations are going on in Sweden.
According to analysts at ING, there is a likelihood that the committee will decide to leave interest rates unchanged. They also expect that the bank will bring forward its interest rate hike from 2023 to 2022. Perhaps, Riksbank will implement its rate hike at the same time that the ECB does the same. They wrote:
“While the risk of a first hike in Sweden by the end of 2022 has become more material, the market’s pricing for Riksbank’s tightening (80bp in the next 12 months) appears way too aggressive.”
USD/SEK forecast
The four-hour chart shows that the USD/SEK has been under intense pressure in the past few weeks. As a result, the pair has moved below the 50% Fibonacci retracement levels. It has also declined below the 25-day and 50-day moving averages while the Relative Strength Index (RSI) has moved slightly above the neutral level.
Therefore, there is a likelihood that the pair will drop on Thursday when the Riksbank delivers its rate decision. If this happens, the next key level to watch will be at 9.00.
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Source: https://invezz.com/news/2022/02/09/usd-sek-forecast-ahead-of-the-upcoming-riksbank-decision/