Archived IMT (2010.10.25)

RIKSBANK DECISION TOMORROW: Heres a daily & weekly EURSEK chart http://chart.ly/lp84ev3 showing the much anticipated break of the 6-week trendline support to add on further losses following an expected rate hike from the Riksbank tomorrow. Riksbank seen raising to 1.00% from 0.75% on Tuesday. Unlike in Norway, where annual CPI is at 1.70% (below 2.00% repo rate), Swedens annual CPI is at 1.40% (well above 0.75% repo rate). Riksbank made two 25-bp hikes since the crisis and is widely expected to extend rates towards an average of 2.1% in Q3 of next year. In H2 so far, SEK is the 2nd highest performer against the dollar out of the top 10 traded currencies behind the Aussie. Forward-looking FX markets have largely bid up the SEK mainly due to the widely telegraphed tightening signalled by the Riskbank. EURSEK chart shows the 6-week trendline support has been broken, leading to possible follow-through towards 9.12. Negative weekly stochastics (right chart) suggest medium term selling momentum behind added losses. The Riksbanks outlook for GDP and CPI will also be closely watched to gauge the extent of further hawkish positioning into Q1.