The USD/SEK exchange rate drifted downwards after the latest Swedish consumer price index (CPI). The pair dropped to a low of 10.25, which was lower than the year-to-date high of 10.77. It has dropped by more than 10% below the highest level in 2022.
Swedish inflation slips
The latest SEK news came from Sweden. According to the country’s statistics agency, the headline consumer price index dropped from 1.1% in February to 0.6% in March. This decline was worse than the median estimate of 1.0%.
Inflation also dropped on a year-on-year basis. It dropped from 12% in February to 10.6% in March. Again, this was a bigger decline than the median estimate of 11.1%.
Meanwhile, the closely watched CPI at constant interest rates dropped to 0.2% and 8.0% on a MoM and YoY basis, respectively. The annual decline was the lowest it has been in months.
These numbers show that conditions in Sweden are improving even as inflation remains at the highest level in decades. Therefore, there is a likelihood that the Riksbanks will embrace a wait-and-see attitude when making its decision this month.
Recent data have shown that the Swedish economy is struggling as the unemployment rate continued rising. The housing sector has been one of the top underperformers. After years of rising, house prices in the country have moved to a correction zone.
In a note last week, analysts at Danske Bank warned that prices will have to drop by 25% from top to bottom. This means that the price crash is only halfway done. Nordea, on the other hand, estimates that the prices will crash by 20%.
Still, the biggest catalyst for the USD/SEK is the weaker US dollar. The dollar index has crashed to about $100 as the Fed pointed to a pivot.
USD/SEK technical analysis
USDSEK chart by TradingView
The daily chart shows that the USD to SEK exchange rate has been in a strong bearish trend in the past few days. It has moved below the 50-day moving average and is approaching the important support at $10.15.
The Relative Strength Index (RSI) has moved below the neutral point. Therefore, the pair will likely continue falling as sellers target the next key support at 10. A move above the resistance at 10.50 will invalidate the bearish view.
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