Forex Market: EUR/SEK daily trading forecast

Yesterday’s trade saw EUR/SEK within the range of 9.1751-9.2841. The pair closed at 9.2677, gaining 0.88% on a daily basis.

At 7:43 GMT today EUR/SEK was up 0.09% for the day to trade at 9.2690. The pair touched a daily high at 9.2790 at 7:00 GMT.

Fundamentals

Euro zone

Italian Business Confidence

Confidence among manufacturing companies in Italy probably remained almost unchanged, with the corresponding index coming in at 94.9 in October, from 95.1 in September, as the latter has been the lowest index reading since August 2013, when the indicator stood at 92.9.

The Manufacturing Confidence survey features 4 000 Italian companies. Respondents give their opinion regarding the current trend of order books, production and inventories, short-term forecasts on order books, production, prices and the general economic situation.

The index of business confidence is seasonally adjusted and has a base year of 2005. Readings of 100.0 signify neutrality in business sentiment. Values exceeding 100.0 imply improving confidence, while values below 100.0 are related with low expectations. Lower than anticipated values may have a limited bearish effect on the common currency. The official reading by Istat is due out at 9:00 GMT.

ECB bond purchases

It became clear that the European Central Bank has begun purchasing covered bonds on October 20th. Last week the central bank purchased bonds at the amount of EUR 1.704 billion in an attempt to cope with deflation and revitalize economy in the Euro region. This is the third time in the past six years, when the ECB entered the bond market.

Sweden

Policy decision by Riksbank

At 8:30 GMT Sveriges Riksbank is expected to announce its decision regarding borrowing costs. The median forecast by experts points that the central bank will probably leave its repo rate without change at the record low level of 0.25% at the policy meeting today. The benchmark rate was cut by 0.50% at the bank’s meeting on July 3rd, with the main reason being lower than expected rate of inflation, despite strengthening economic activity.

During the recent months inflation rate has been a bit higher than anticipated, but however, there will probably not be a rate hike until the end of 2015, according to the central bank.

According to an extract from the most recent statement by the Executive Board of the Riksbank, ”The forecast for inflation in the near term has been revised upwards slightly as the result of a weaker krona and somewhat higher labor costs. The low repo rate will contribute to demand in the economy increasing, which will cause inflation to rise. As in July, the forecast is that CPIF inflation will attain 2 per cent at the beginning of 2016.

The overall picture of the economic outlook and inflation prospects for Sweden remains largely unchanged since the July Monetary Policy Report. The repo rate needs to remain low for a long period of time for inflation to rise towards the target.”

The repo rate represents the rate at which banks can borrow or deposit funds at the Riksbank for a period of seven days. Short-term interest rates are of utmost importance for the valuation of national currencies. In case the central bank left intact the benchmark rate, this might provide support to the krone, while a rate cut would have a bearish effect on the national currency.

Balance of Trade

Swedens balance of trade probably produced a surplus at the amount of SEK 1.9 billion in September, according to market expectations. In August the country had a deficit of SEK 2.8 billion, compared to a surplus of SEK 1.9 billion in August last year. The total value of exports amounted to SEK 84.2 billion in August, while total imports were valued at SEK 87.0 billion. In comparison with August 2013, exports remained unchanged in terms of percentage, while imports were up 6%, according to data by Statistics Sweden.

Swedens major exports include machinery, motor vehicles, paper products, pulp and wood, iron and steel products, chemicals, while its major imports are machinery, petroleum and petroleum products, chemicals, motor vehicles, iron and steel.

The trade balance, as an indicator, measures the difference in value between country’s exported and imported goods during the reported period. It reflects the net export of goods, or one of the components to form the Gross Domestic Product. Generally speaking, exports reflect economic growth, while imports indicate domestic demand.

In case the trade balance surplus turned out to be larger than anticipated, this would have a bullish effect on the krone. Statistics Sweden is expected to release the official numbers at 8:30 GMT.

Producer prices

Producer prices in Sweden probably climbed at an annualized rate of 2.9% in September, according to expectations, following a 2.7% increase in August, with the latter being the fastest pace since May.

The Producer Price Index measures changes in prices of goods and services either as they leave the production process, or as they enter it. Unlike the CPI, which measures price changes from the consumers perspective, the PPI basically gauges the prices received by domestic producers for their output, or the prices paid by domestic producers for their intermediate inputs. Generally speaking, a higher-than-expected PPI reading should be considered as having a bullish effect on the Swedish krone, as it suggests accelerated consumer inflation, while a lower-than-expected result would have a bearish effect. The official data is due out at 8:30 GMT.

Pivot Points

According to Binary Tribune’s daily analysis, the central pivot point for the pair is at 9.2423. In case EUR/SEK manages to breach the first resistance level at 9.3095, it will probably continue up to test 9.3513. In case the second key resistance is broken, the pair will probably attempt to advance to 9.4185.

If EUR/SEK manages to breach the first key support at 9.2004, it will probably continue to slide and test 9.1333. With this second key support broken, the movement to the downside will probably continue to 9.0915.

The mid-Pivot levels for today are as follows: M1 – 9.1124, M2 – 9.1669, M3 – 9.2214, M4 – 9.2759, M5 – 9.3304, M6 – 9.3849.

In weekly terms, the central pivot point is at 9.1903. The three key resistance levels are as follows: R1 – 9.2301, R2 – 9.2717, R3 – 9.3115. The three key support levels are: S1 – 9.1487, S2 – 9.1089, S3 – 9.0673.