Early today the Riksbank, which is the Swedish central bank, maintained a dovish stance despite analyst and investors expectation of a hawkish tone. What happened next was a complete devaluation of the Swedish Krona, sinking today by 1% and expectation of even more devaluation to continue in the next couple of months. The EURSEK sunk to highs of 9.82 and was just below the historical highs of 10.00, a level which was revisited last in the financial crisis.
The Riksbank was wary of two things-the stagnant inflation which has been stalling despite the continued asset purchase of government bonds by the central bank and secondly, the monetary policy path that might be taken by other central bankers.
A look at the chart reveals that the SEK will continue to devalue in the next 18 months, atleast by what the chairperson of the Riksbank said. In the monthly chart, there is a break above the current consolidation which has been taking place since for the past 6 year when this pair was trading within a narrow range of 8.22 and 9.56. With the dovish release, price action broke above the 9.56 tag as momentum surged and there is an inclination of an upper band banding.
My trade plan for this pair is to wait for things to cool down and enter in the 4HR charts with the weekly chart my lead trend decider. I will enter this trade next week when price has retraced back by 50-70 percent , that is when there is a buy signal within the 50.0%- 23.6% Fibonacci level at the lower level from this week’s Hi-Lo.
This plan will probably pan out as follows:
Buy Limit: 9.73-9.78 in the 4HR chart
Stop Loss: Below 9.68
TP: Trail profits, it will be a long way up.
Otherwise, have a good trading day.