The rates continue within the uptrend, in favor of the USD. In October, we saw a loss of trend momentum and a significant strengthening of the SEK. The dollar was weakened, given fears that the slowdown in the global economy will affect the US economy and lead to a recession. The Swedish Krona, despite being in the zone of economic recession, strengthened in October thanks to the decision of the Riksbank to raise the rate, which contradicts the general trends of monetary policy easing by central banks around the world, especially in the EU. However, there was no trend reversal. The rates, having tested the support line, are returning to growth in November.
Recent macroeconomic data has provided significant support for the USD. At the end of October, the US trade deficit decreased; business activity is growing. The wave of optimism on the market regarding the expectations of investors about the achievement of a trade deal between China and the United States also affects the value of the dollar strongly. According to investors, the agreement could happen before the end of the month, although the date has not yet been determined. Therefore, we can expect that with the appointment of this date, there will be a further increase in the value of risky assets, the main of which is the USD.
The SEK, which was strengthened by the actions of the regulator, remains without incentives for growth. Recent macroeconomic reports from Sweden look disappointing and show a decline in the business activity. For example, the PMI index of business activity in the services sector declined for the second month in a row and amounted to only 49.5 pips in October. In the EU as a whole, business activity remains near 6-year lows, at 50.6 pips. Therefore, the strengthening of the crown last month can be considered as a price correction, which ended last week.
In this situation, we believe that the deals to BUY would be the most effective in the medium term. Most technical analysis tools, including the MACD and Stochastic oscillators, also indicate the efficiency of the deals on the trend.
