The Swedish Krona and Stockholm’s stockmarket

In the notes section of last week’s Macro Extremes newsletter, I alluded to a change of direction for the Swedish Krona (specifically versus the USD).

It fell 1.7% from last weeks close and has declined 2.6% in the past fortnight.

I wrote, “SEK/USD is nearing an overbought extreme and closing in on an (upward) mean reversion. This suggests Swede’s should prepare to sell some of their strong Krona and buy USD. While this should make for holidaying in the United States at its cheapest at anytime over the past 18 months, SEK strength should start to affect the export prospects of Swedish domiciled businesses.”

My unpublished notes continued to say,

“The strength in the SEK/USD also provides a reasonable (correlated) explanation to the advance seen in the OMX Stockholm 30 equity index, which incidentally is nearing its own ‘overbought extremes’.”

The reciprocal (USD/SEK) also has a directional correlation with the Swedish government 10 year bond yields.”

This past week, the USD/SEK rose and so did the Swedish 10’s.

The 10’s moved from last week’s oversold extreme low of 1.84% to close yesterday at 2.23%.

Also for the week, the OMX Stockholm equity exchange fell 2.5% (closing at 2,338) while performing a outside weekly bearish reversal.

2,086 is the buying (or re-entry) point I’m looking for, which is approximately 11% lower.

January 7, 2024

by Rob Zdravevski

rob@karriasset.com.au