A Possible Range-Bound Rally in USD/SEK
- Break of Horizontal Support Level in USD/SEK
- Two Important Ranges in Play Now
- Possible Long Set-up in USD/SEK
After failing at overhead resistance, USDSEK has careened lower through horizontal support, but a secondary range boundary and bullish RSI divergence may provide support for a renewed push higher.
USDSEK has broken horizontal support in the 6.40 area, and the pair is still making lower highs and lower lows. However, we are now moving into a broader range which could provide support between 6.35 and 6.30.
In addition to this possible support, we also have a positive divergence between the Relative Strength Index (RSI) and the underlying price. This could indicate that the break below 6.40 might be a washout for those who favor a stronger US dollar (USD) against the Swedish krone (SEK).
As mentioned in our previous analysis, USDSEK did rebound to our first price target at 6.55, but ultimately failed to take out this resistance level and has since declined and broken support at 6.40. This is a classic example of why it’s so important to protect each and every position, even when price is “going our way.”
See recent: The Primary Short-Term Indicator for USD/SEK
For now, USDSEK is trading in a broader support range between 6.40 (6.35 currently) and 6.30. Provided this support area holds, and given the aforementioned positive divergence between RSI and price, we could see a decent bounce in USDSEK in upcoming weeks.
Technical Outlook for USD/SEK
Support: 6.35, 6.30, and 6.20
Resistance: 6.40, 6.57-6.60, 6.70, and 6.85-6.95
At this stage, resistance has been established at 6.40. If overcome, the next major battleground for bulls and bears might be the 6.57-6.60 area, and from there, 6.70 is the upper end of the resistance range for USDSEK.
Long Trade Idea for USD/SEK
Using half of the desired position, go long USDSEK at current price levels (between 6.35 and 6.38). Add to the initial position if price comes down to test the next support area just above 6.30. The stop loss should be executed if USDSEK closes below 6.28.
The price targets for this current trade idea would be 6.48 and then 6.55-6.57. If the first target price is reached, the stop loss should be moved to the entry price.
By Rafiul Hossain, Guest Analyst, DailyFX.com
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.