“The SEK has depreciated more than any major currency in 2019. This weakness now looks overdone, however, and no longer appears to be supported by underlying fundamental or technical factors,” TD Securities analysts argue.
“The Swedish economy has softened but the move looks overdone – particularly as other risky assets have recovered sharply YTD.”
“With a lot of the bad news now in the price, we think the SEK looks vulnerable to a correction. This week’s Riksbank meeting should pass quietly, but our base case for a broadly unchanged policy stance is unlikely to provide further fuel to SEK bears.”
“Against this backdrop, we think EURSEK looks ripe for a reversal lower. The October 11 high (10.5370) should provide a notable degree of resistance heading into this week’s policy meeting. As an alternative, we think CADSEK has potential for a significant retracement lower as we are generally inclined to fade CAD strength in this environment.”