USD/SEK falls sharply as the US dollar weakens, Swedish CPI

• The USD/SEK declined to a low of 10.825.
• The Swedish CPI rose to 6.7% YoY, as expected.
• US CPI from October is due on Tuesday.

The USD/SEK fell sharply on Monday to a daily low of 10.825 and then consolidated around 10.830, showing a daily decline of 0.40%, driven by the report of hot Swedish inflation figures and a weakening USD.

Early during the European session, the  SCB Statistics from Sweden reported that the Consumer Price Index (CPI) from October rose to 6.7% from its previous 6.5%, just as the markets expected. In that sense, markets seem to be betting on the SEK as they are bracing for a hike in the next December meeting of the Riksbank and pushing cuts to mid-2024.

On the other hand, markets await the US CPI on Tuesday and Producer Price Index (PPI) and Retail Sales figures on Wednesday, which will provide the Federal Reserve (Fed) with fresh evidence on the US inflation outlook. Last week, bank officials and Chair Powell were seen as cautious and stated that the "job wasn’t done", pointing out that they’ll need more evidence to confirm that inflation is coming down. For the upcoming December meeting, markets seem to be confident that the Fed won’t hike, and the USD’s trajectory will likely be set on how long investors will price in rates at restrictive levels based on the outcome of the incoming data.

USD/SEK levels to watch

Based on the daily chart, the USD/SEK holds a bearish bias, with indicators reflecting that the bears are strengthening. The Relative Strength Index (RSI) reveals a downward slope below its middle point, while the Moving Average Convergence (MACD) histogram presents larger red bars.  On the broader scale, the pair is also below the 20 and 100-day Simple Moving Averages (SMAs), but above the 200-day SMA, suggesting that the bulls continue to exhibit strength in the overall trend but are seen as weak on the shorter time frames. 

Supports: 10.830, 10.770, 10.760
Resistances: 10.862 (100-day SMA), 10.900, 10.980.

USD/SEK daily chart