USD/SEK sees an uptick as US dollar strengthens, investors await CPI, Fed decision

• The USD/SEK currency pair advanced near 10.50, showing modest gains.
• Strong labor market indicators challenge the Federal Reserve's dovish stance, spurring speculations on potential policy shifts.
• US bond yields are rising, benefiting the US Dollar.

The US Dollar (USD) made noticeable gains in Monday's trading session against the Swedish Krona (SEK), propped up by a strengthening dollar ahead of November’s Consumer Price Index (CPI) and the Federal Reserve's decision on Tuesday and Wednesday, respectively. 

The US Bureau of Labor Statistics data showed a better-than-anticipated rise in November's Average Hourly Earnings, recording a 0.4% (MoM) increase, contrasted to the forecasted 0.3% and the prior 0.2% increase. Furthermore, November saw a remarkable surge in the US Nonfarm Payrolls, reaching 199K from a previous 150K, higher than the projected 180K, with the Unemployment rate decreasing to 3.7% from 3.9%.

The US Treasury yields are trending upwards, with the 2-year rate currently trading at.4.73%. Both the 5-year and 10-year yields are hovering around 4.25%. Higher US yields may be attributed to markets questioning the recent dovish speculations on the Federal Reserve (Fed), as strong labor market figures may push the bank to be more aggressive and hold rates in restrictive levels for longer than expected. 

That said, on Tuesday, the US will deliver the Headline and Core Consumer Price Index (CPI) from November from the U.S. Bureau of Labor Statistics. The following day, attention will be onthe Fed Interest Rate Decision and the Federal Open Market Committee (FOMC) Economic and Interest rate projections, followed by Chair Powell's presser where investors will look for clues for forward guidance. As for now, the CME FedWatch tool indicates that markets are delaying rate cuts in 2024 after Friday’s labor market data.

USD/SEK levels to watch

On the daily chart, the positive slope of the Relative Strength Index (RSI), though in negative territory, signals a potential build-up of buying momentum. This subtle strength of the bulls is further corroborated by the Moving Average Convergence Divergence (MACD), depicting rising green bars, suggesting that buyer momentum is starting to take precedence.

The pair's position concerning Simple Moving Averages (SMAs) also suggests that the bulls are waking up. Despite being lodged below the longer-term 100 and 200-day SMAs, indicative of a dominantly bearish backdrop, the pair maintains a stance above the 20-day SMA, which mirrors a short-term bullish pulse amidst a broader bearish scenario.

Support Levels: 10.470, 10.453 (20-day SMA), 10.430.
Resistance Levels: 10.540, 10.570, 10.600.

USD/SEK daily chart