USD/SEK has been in a sliding mode since Tuesday, when the rate hit resistance at 9.7500. Overall, it appears that the pair is getting ready to complete a “Head and Shoulders” formation, which could happen if it dips below the 9.6000 zone, the pattern’s neckline. Up until that happens, we will stay sidelined and monitor the price action.
If indeed the bears decide to push the action below the 9.6000 zone, then we will turn our eyes to lower levels, the first one being the 9.5000 zone, marked as a support by the low of August 14th. If they are not willing to stop there, then we could see extensions towards the 9.4100 zone, where another break may open the path towards the 9.3100 area, near the low of July 18th.
Looking at our daily momentum studies, we see that the RSI turned down after it hit resistance slightly below 50, while the MACD, already negative, lies slightly below its trigger line. Both indicators detect negative momentum and support the notion for further declines.
On the upside, we would like to see a clear break above 9.7500 before we consider the H&S pattern to be invalid. Such a move would initially aim for the high of October 14th, at around 9.8600, the break of which could trigger more advances, perhaps aiming for the high of October 9th, at around 9.9650.
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