The Swedish Krona took a hit this Friday, after a contraction in the Swedish economy in the 4th quarter of 2020. Data from the Statistics Office in Sweden show that Gross Domestic Product (quarterly) fell 0.2% in Q4 2020, compared with a 4.9% increase in Q3 2020. When compared with the same period in 2019, GDP fell 2.2%, showcasing the impact that the coronavirus pandemic has had on the Swedish economy.
However, Sweden looks good to avoid a recession, as other economic indices have shown improvement in recent months. Data also released on Friday showed that retail sales came in at 3.4%, which significantly beat forecasts of a 3% drop.
As a result of the poor GDP data, the USD/SEK climbed this Friday, allowing the pair to effect an overdue correction in prices after a weaker dollar has seen the pair drop by 17.4% since the onset of the pandemic in April 2020.
Today’s 0.99% gain in the USDSEK positions the pair to put the resistance at 8.38354 under pressure. So far, the resistance level has withstood the intraday test. However, if it does give way, then we could see a price push towards 8.46926 (27 November/1 December 2020 lows), while 8.51198 (early December 2020 highs) stands as a potential upside target.
On the flip side, price rejection at the current resistance followed by a pullback would resume the downside price evolution following the 9 February breakdown of the bearish flag pattern on the daily chart. A resumption of this move tests the one-month-old support at 8.24840 initially. If this support gives way, we could see a further decline towards 8.14822 as the price aims for a projected measured move towards 7.83634.
