By Russell Glaser – News released from Europe today showing increased economic forecasts for European growth will have a positive impact on the Scandinavian economies and in turn help to strengthen the Swedish krona.
Today the European Commission increased its estimate for gross domestic product in the European Union. The commission believes that Europe’s economy will grow by 1.8% as opposed to the commission’s previous estimate of 0.9%. The upgrade comes despite a warning of potential slowing growth in the EU economy during the second half of 2010. The slowdown and any additional weakening in European GDP may be caused by deteriorating fiscal conditions and the ending of government stimulus programs.
The European economy will be powered by export growth in Germany. The German economy may benefit as well from the weakened euro as a weak euro can make German imports more competitive abroad. Countries that use the euro are expected to expand economic activity by 1.7%.
The implications for the Swedish Krona should be a positive. The European Union contains 7 of the 9 largest trade partners for Sweden. Any increase in European growth should directly affect growth in the Swedish economy.
Looking at the technicals for the USD/SEK, the pair continues to trend lower. An intermediate trend line begins at the highs in early June. The trend line has two points of contact in late August. The downward trend is confirmed by the 20-day simple moving average that is sloping sharply lower.
The previous target remains the same at 7.0400 (S1). Resistance comes in at the pullback beginning at 7.1950 (R1), followed by the completion of the bullish correction at 7.3350 (R2).
Forex Market Analysis provided by ForexYard.
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