USD/SEK elevates as US yields rise ahead of employment data, Riksbank minutes

• The USD/SEK rallies upward, up by 0.80%, trading around the 10.46 level.
• A stronger USD and rising yields are pressuring the Swedish Krona.
• The Riksbank November minutes showed confidence that previous rate hikes slowed the economy, which justified the pause.

In Monday's trading session, the USD/SEK advanced towards 10.458, under the influence of rising US yields and dovish sentiments cast by the Riksbank November minutes. For the rest of the week, the  US employment data will be the highlight as it will help investors to continue modelling their expectations regarding the next Federal Reserve (Fed) moves. 

The escalating strife between Israel and Hamas has also provided a boost for the U.S. dollar, the go-to safe-haven currency, reflecting heightened global risk aversion. In line with that, the US DXY index recovered towards 103.70, seeing more than 0.50% gains.

Currently, US Treasury yields are also rising ahead of key labour market figures from the US from November, which are due this week. The 2-year rate is recorded at 4.56%, while the 5-year and 10-year yields are marked at 4.24% and 4.28%, respectively and as yields rise, this typically benefits the USD. 

In line with that, on Tuesday, the US ISM Services PMI by the Institute for Supply Management (ISM) is estimated at 52, a slight increase from the previous 51.8 and on Wednesday, the Automatic Data Processing (ADP) will release its  Employment Change report. The headline events are on Friday when the US Bureau of Labor Statistics releases data on the Average Hourly Earning, Nonfarm Payrolls and Unemployment rate figures from November, all key metrics closely monitored by the Fed. In that sense, the bank will get a clearer outlook on the US economy, and it will probably have an important role in the upcoming decision, so the price dynamics of the USD may have an impact.

On the SEK’s side, Riksbank released its November meeting minutes. The document justified the surprising pause at 4% as previous rate hikes were slowing the economy, also impacting the labour market. Furthermore, no further hikes were hinted at, but the door was left open for further tightening in case data justifies it.

USD/SEK levels to watch

The indicators on the daily chart reflect that the bulls are advancing but have yet more work to do. The Relative Strength Index (RSI) position shows a positive slope but is currently in negative territory, while the Moving Average Convergence Divergence (MACD) shows rising green bars, an indication that the bullish momentum might be in its early stages, suggesting a potentially favourable condition for buyers if the momentum continues to develop and is sustained over time. 

Nonetheless, the broader picture conveyed by the Simple Moving Averages (SMAs) offsets initial optimism. The asset stands below its 20, 100, and 200-day SMAs, which indicates the prevailing dominance of the sellers in the market. 

Support Levels: 10.455, 10.448, 10.400.
Resistance Levels: 10.485, 10.490, 10.500.

USD/SEK daily chart