Aug 12 (Reuters) - Friday price action suggests Swedish crown traders were looking for an excuse to book profits on SEK longs and a softer than expected return for Swedish CPIF may have triggered a climb in EUR/SEK. However, the Riksbank is unlikely to alter its hawkish rate path trajectory and this will limit SEK losses.
EUR/SEK recorded a bullish candlestick engulfing line on Aug. 9 and the subsequent climb from 10.3395 has confirmed the reversal signal. The market has turned up the trend reversal heat today by taking the price close to the 200-day moving average line at 10.4307.
A minimum correction reading taken off the 10.8105-10.3395 July 5 to Aug. 9 drop provides a bull target at 10.4507. The EUR still has a mountain to climb as it attempts to retrace more of the 4.36% one-month drop.
Despite the implications for Swedish economic growth, the Riksbank is still likely to deliver a big 75-basis-point rate hike in September and move another 50 basis points in November. The rate outlook could slow SEK depreciation but for the near-term the market looks to be in adjustment mode.
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EUR/SEK Daily Candle Chart: https://tmsnrt.rs/3zKhRBO
(Peter Stoneham is a Reuters market analyst. The views expressed are his own)
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.