USD/SEK Trading Guide: How to Trade the USDSEK FX Pair

The Forex market extends far beyond the widely most popular Forex pairs. Pairs like USD/SEK (US Dollar vs Swedish Krona) might not be household names, but for savvy traders who understand the factors that move them, they can present interesting trading opportunities. So what is the USD/SEK exactly, how do you trade it, and what else should you know about it? Let’s find out:

TL;DR

• The exchange rate between the USD and SEK indicates the amount of Swedish Krona (SEK) required to purchase a single US Dollar (USD).
• Inflation, central bank decisions, global economic growth, market mood, the political and geopolitical landscape, as well as oil prices are some of the factors that can influence the value of the USD/SEK.
• There are several ways you can trade the USD/SEK pair*.
• Among the various options for trading the USD/SEK currency pair, Contracts for Difference (CFDs) stand out due to their flexibility and accessibility for Forex traders.
• While CFDs can offer several advantages, it's important to remember they also come with inherent risks.
• Day trading, swing trading and position trading are three popular types of trading styles.

*Availability subject to regulation.

What Is the USD/SEK?

The USD/SEK (USDSEK), also known as the US Dollar/Swedish Krona exchange rate, is a currency pair that indicates how many Swedish Krona (SEK) you need to buy one US Dollar (USD). In other words, it represents the relative value of these two currencies.

In the USD/SEK Forex pair, the USD is considered as the base currency, while the SEK is considered as the quote currency. If the USDSEK exchange rate is 10.60, it means you need 10.60 SEK to buy 1 USD.

The History of the USDSEK Pair

The Krona emerged with the formation of the Scandinavian Monetary Union, which replaced the riksdaler riksmynt and has been Sweden’s official currency since 1873.

Established in 1792 through the Coinage Act, the American Dollar is the official currency of the United States and other countries and territories like Ecuador, The British Virgin Islands and Panama. Furthermore, it's the world's most widely used currency and plays a pivotal role in the international financial system.

While in 1939 Sweden decided to peg the Krona to the USD, in 1992, Sweden officially adopted a floating exchange rate system for the SEK. Between 1992 and 2001, the USDSEK currency pair gained more than 88% from around 5.5620 to around 10.478. Between 2002 and January 2014, the Forex pair went down more than 38% from around 10.462 to around 6.424. From 2014 to June 2024, the USD/SEK has been up more than 63%, from around 6.424 to around 10.502. It will be interesting to see how these figures might change in the future.

What Is USDSEK CFD Trading?

USD/SEK trading with CFDs or Contracts on Difference lets you speculate on the FX pair’s price movements without owning the underlying currencies.

When trading Forex CFDs, you are essentially opening and closing positions with the hopes of profiting from the difference between your entry and exit prices, whether the exchange rate goes up or down.

Moreover, a key feature of CFDs is leverage, which magnifies your potential returns. However, it's a double-edged sword - while it can amplify profits, it can also significantly amplify losses.

Long vs. Short CFD Trade

When trading USD/SEK with CFDs, you can speculate on the exchange rate's direction in two ways:

• Going Long: If you believe the US Dollar (USD) will strengthen against the Swedish Krona (SEK), which means that you expect the USD/SEK to go up, you can open a long position by buying a USD/SEK CFD contract. If your analysis is correct, you'll profit from the price difference when you sell the contract later. However, if the currency pair goes down, you’ll face losses when you close your CFD position.
• Going Short: If you anticipate the SEK strengthening against the USD, which means that you expect the USD/SEK to go down, you can open a short position by short-selling a USD/SEK CFD contract. Here, you profit if the exchange rate goes down, allowing you to repurchase the CFD on the USD/SEK at a lower price later and pocket the difference. On the other hand, if the currency pair goes up, you’ll face a loss.

Your decision to go long or short depends on your analysis of the factors influencing the USD/SEK exchange rate, your prediction of its future movement, and your risk appetite.

What Are the Potential Drivers of the USD/SEK Pair?

To get ready to trade the USD/SEK, you might want to get a better understanding of this Forex pair’s fundamentals. For that, you should be aware of the economic, political, and social factors that can influence the exchange rate.

Let’s now take a closer look at the events that can impact this Forex pair the most:

Economic Growth

Economic growth prospects in the United States and Sweden play a significant role in influencing the USD/SEK exchange rate due to their impact on interest rates, investment flows from the government, foreign investors, and local companies, as well as trader confidence.

Monetary & Fiscal Decisions

The USD/SEK exchange rate is primarily influenced by the Federal Reserve (Fed) in the US and the Riksbank in Sweden through their monetary policy choices. These decisions mainly involve setting interest rates, which is a crucial instrument for controlling inflation and economic growth.

When the United States increases interest rates relative to Sweden, it encourages investors to keep their money in US dollars, as it presents the possibility of greater financial gain. The heightened demand for USD bolsters its value relative to the SEK. Fiscal policy, encompassing government expenditures and taxation, can also have an influence on the currency pair.

Elections

The USD/SEK exchange rate can also be influenced by elections in both the US and Sweden, mostly due to their potential impact on overall local economic policies, as well as political agendas, and international commercial relations. Additionally, it has the potential to create uncertainty and provoke a feeling of risk, impacting market mood and the confidence of Forex traders.

Oil Prices

In contrast to the United States, which is a net Oil (CL) producer and exporter, Sweden largely depends on oil imports. Consequently, a spike in oil prices often leads to an elevation in Sweden's expenses for importing goods. The effect on revenues for the United States is a bit more complex. The impact of increasing oil prices in the US is contingent upon many circumstances, as the country both exports crude oil and imports refined oil products. Overall, fluctuations in oil prices can still impact the USD/SEK exchange rate by influencing their economic development.

Market Sentiment

Market sentiment, which refers to the collective feelings and perspectives of market players, can have an impact on the USD/SEK exchange rate, because it can influence the supply and demand for each currency depending on the main emotions driving the market (greed, fear, optimism, euphoria, uncertainty, etc).

Analysing USD/SEK Exchange Rate: Technical Analysis vs. Fundamental Analysis

Forecasting the way the USD/SEK currency pair can move (up, down or flat) requires knowing about both technical analysis and fundamental analysis. Additionally, some traders also utilise behavioural finance tools to gauge market sentiment and understand the psychological aspect of trading, such as volatility indicators and +Insights. The best market analysis approach often depends on your knowledge, trading strategy, and trading horizon.

Trading the USD/SEK Using Technical Analysis

Mastering technical analysis is a cornerstone for many USD/SEK traders. It mostly often involves dissecting historical price movements through trading charts to identify opportunities.

Additionally, traders can use different Forex trading tools and indicators, such as the Relative Strength Index (RSI), the Slow Stochastic Indicator, the Coppock Curve Indicator, as well as the reversal patterns, among others.

Trading the USD/SEK Using Fundamental Analysis

Because of short-term trading challenges, some might prefer a longer trading horizon and turn to fundamental analysis to determine the intrinsic value of the USD/SEK FX pair, which can help them spot potential differences with the current market value.

For that, fundamental analysis takes into consideration different major economic data (that you can find in an economic calendar) to delve into the broader economic, political, and social forces that shape the US and Swedish economies.

3 Trading Strategies You Can Use to Trade the USD/SEK

The USD/SEK market offers a variety of trading strategies. In this part, we'll explore 3 distinct trading approaches that mostly differ by the time horizon you hold your Forex positions open.

Day Trading: Trading the USD/SEK with the Economic Calendar

Day trading is one of the most active trading styles. The main goal is to accumulate buy and sell trading positions on the USD/SEK by holding them from a few minutes to a few hours to capitalise on (very) short-term price movements.

The biggest advantages of this trading style is to potentially rack up gains with quick price movements. However, it can be quite a risky strategy, as the market moves fast. It means that losses can happen just as quickly as gains. Additionally, it requires time to monitor the market and a disciplined approach to trading, which can make it stressful for some traders to handle their emotions.

One of the most common ways to use day trading on the USD/SEK is trading economic data. This strategy, also called news trading, closely follows the impact of the publication of the most important economic statistics, releases, and data from both the United States and Sweden.

While some economic data can be specific to a country like the Personal Consumption Expenditures (PCE) in the United States, traders will usually watch out for some common major news that can influence monetary policy decisions in both the United States and Sweden, such as the Gross Domestic Product (GDP) and the Consumer Price Index (CPI).

Once they are aware of the publication of such news, they can decide to open a long or short position before or after the release, depending on their directional bias. For that, they will mostly use technical analysis in their trading to identify potential technical triggers that can help them forecast the direction of the USD/SEK.

Swing Trading: Trading the USD/SEK within a Range

Unlike day trading's quick bursts, swing traders hold positions for days or even weeks, aiming to capture bigger trends than intraday price movements to capitalise on price swings often by buying low and wait for the price to rise to sell for a profit (or vice versa during a bearish market).

This type of trading is less time consuming than day trading and has the potential for capturing larger price movements and trends. Swing traders also need to pay rollovers fees when keeping their positions open overnight and also bear the overnight risk, meaning that the markets can move against you while you’re not monitoring.

Which kind of trading strategy can swing traders use to trade the USDSEK FX pair?

The Forex market, like many others, doesn't always exhibit a clear uptrend or downtrend. There are often periods of consolidation where the price fluctuates between a defined upper and lower level.

This sideways movement creates a range, which can be ideal for swing traders. With range-bound markets trading on the USD/SEK, swing traders can get a chance to buy the pair near support (the lower level of the range) and sell it near resistance (the upper level of the range) as the price bounces back and forth.

Swing traders can identify these trading ranges through technical analysis tools, such as support and resistance levels, trendlines and channels, and use them to set entry and exit points for their trades.

Position Trading: Trading the USD/SEK with the Trend

Unlike the quick moves of day trading or the calculated rides of swing trading, position trading takes a longer-term view by trading significant trends in the Forex market and holding positions for months.

Long-term trends unfold slowly, allowing you to focus on analysis of the overall market movements and trends. However, it also means that seeing potential returns or even losses on your USD/SEK Forex trading position can take a long time. It’s also important to remember that it can be difficult to predict long term trends and that markets can change course over long periods, which can be risky.

Most of the time, position traders will use trend trading strategies to identify and capitalise on those long-term trends.

Moving averages, Bollinger Bands, Moving Average Convergence Divergence (MACD), trendlines, channel lines, as well as the Fibonacci extensions and retracements, are some of the tools position traders can use.

USD/SEK Trading — Frequently Asked Questions (FAQs):

Which kind of currency pair is the USD/SEK?

The USDSEK currency pair is considered an exotic pair because it consists of a major currency, the American Dollar (USD), and another currency from a less powerful economy on the international stage, the Swedish Krona (SEK).

What are the USD/SEK trading hours?

The Forex market is open around the clock from Sunday evening to Friday evening. However, there are trading hours during the day when the USD/SEK pair is more active. This typically occurs during the overlap of the US and European trading sessions. Keep in mind that the trading hours for CFDs on Plus500 can vary depending on the operator.

USD/SEK price forecast: How can I know if the price of the USDSEK pair will go up or down?

Predicting the exact direction of the USD/SEK exchange rate is difficult, but understanding the main factors that influence the value of the currency pair can help you make informed trading decisions.

As such, you should consider factors such as monetary policy, economic data, risk sentiment, geopolitical events, and oil prices. You can also have a look at the USDSEK historical prices to try to forecast their direction.

However, while historical trends can offer some insight, unexpected events can cause the exchange rate to move in unforeseen directions. So, past performance is not necessarily indicative of future results.

What are some of the most common mistakes when trading the USDSEK pair?

Getting into USD/SEK trading without a deep knowledge of Forex terms you should know and a clear strategy is often the number one among the key trading mistakes, as it can lead to impulsive decisions. Additionally, if you don’t control your emotions when trading, it can lead to poor results. Finally, Forex traders need to learn how to be in the right trading mindset to get the most out of their trading.

What are the steps to follow to trade the USD/SEK CFDs on Plus500?

If you’d like to trade Forex CFDs with Plus500, and more specifically the USD/SEK pair, you should first learn about the USD/SEK CFD, decide how you want to trade the Forex pair and write your trading plan. Then, you can open a CFD trading account and verify it. Once funded, you can look for the USD/SEK on the trading platform and get started.