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Short USD/SEK for target of 7.90 – Deutsche Bank

Analysts at Deutsche Bank are recommending to go short on USD/SEK cross as their G10 Trade Idea of the week with the following parameters:

“Target 7.90, entry 8.2856, stop 8.60”

Key Quotes

“SEK is trading at too large a discount to Riksbank pricing, in our view. This discount is probably explained by market fears over a potential housing crash, which are harder to price in rates because of the Riksbank sounding quite sanguine about slowing house price growth. We agree with the Riksbank that the housing market will only see a soft landing in the next weeks and expect the focus to return to the macro data, starting with Q3 GDP and the manufacturing PMI this week. We see cleaner upside risks to market expectations again after a three-month decline in Swedish data surprises. Entry levels are attractive again and our skew volume indicators suggest that positioning is much cleaner after weeks of net SEK selling in the options market.”

“We prefer to buy SEK against USD as EUR/USD may have further upside thanks to the Eurozone's strong macro pulse and an improving political outlook in Germany. For the same reason we also roll our USD/CHF longs into a long EUR/CHF position.”

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