EUR/SEK targets lower levels – Danske Bank

Arne Rasmussen, Chief Analyst at Danske Bank, sees the Swedish Krona appreciating further in the next periods.

Key Quotes

“In the Scandies, looking at our FX spot monitor, we currently observe the biggest misalignments in EUR/SEK, which is very oversold, trading 2.5 standard deviations below our short-term model’s fair value estimate of 9.6491”.

“Historically, the model-spot deviation for EUR/SEK has been a reliable leading indicator for corrections and we recommend positioning for a possible spike higher in EUR/SEK via a 1M ratioed call spread”.

“Fundamentally, we remain bearish on EUR/SEK and tactically we still look to sell on rallies”.

“Indeed, the SEK could see further support if the Riksbank reduces its easing bias at its meeting on 15 February but also where the Riksbank is likely to stay vigilant on too fast an appreciation of the SEK. In our view, the cross has come a long way quickly and, thus, from a risk/reward perspective, we like to position for a temporary bounce”.