By Greg Holden – The liquidity exit of the European Central Bank (ECB) may soon drive regional rates higher than Denmark’s and subsequently dampen demand for the Danish krone (DKK). Despite their dependence on euro zone credit, Ireland, Greece, and Portugal may find themselves without ECB-added liquidity as the euro zone appears committed to its plans to withdraw emergency funds.
The differential between euro-area interest rates and Denmark’s interbank rates has begun to turn negative, leading to a higher probability of a rate increase in next month’s meeting by Denmark’s Nationalbanken.
In Sweden, a moderate dip in the krona (SEK) was caused by USD profit-taking following the announcement of the US quantitative easing program (QE2). The USD/SEK rose almost 3.6% in the days following the announcement, and has since remained stable near the 6.7250. Sweden also appears poised to raise rates once more in the near future, but dovish statements from the Riksbank following the last rate change have speculators uncertain.
USD/DKK Range-Trading
The chart below is the USD/DKK daily chart provided by ForexYard.
The pair appears to be range-trading between 5.2300 and 5.4270, represented by the 23.6% and 38.2% Fibonacci retracement levels, respectively. The pair appears to be approaching the upper border of its range-trading behavior and indicators are beginning to show impending downward pressure.
The Stochastic (slow) on the chart below has what appears to be an impending bearish cross. After completing the cross, the pair is likely to experience growing sell pressure. The RSI has the price in an ascending pattern which suggests the pair has room to go higher. Once it reaches the over-bought region it will support the notion of going short on the pair.
USD/DKK – Daily Chart
Forex Market Analysis provided by ForexYard.
© 2006 by FxYard Ltd
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