Depending on news flow GBPSEK could breach historical lows
Being short GBPSEK has been a good trade since mid-May where the pair have gone from a high of around 11.5285 to a low of 10.3470 a couple of days ago having been frustrated by a strong zone of support between 10.3800 and 10.4500. Since the beginning of August GBPSEK has been in a holding range and is quite likely at some point to try and resume it's downward trend – but it will have to breach that solid layer of support and doing so is likely to require a strong news catalyst such as central bank action – or a lack of it – or further evidence of divergence between the fortunes of the UK and Swedish economies. Sweden has faired better in recent years having had its financial crisis in the 1990s and has managed its economy more effectively than the UK.
On August 28 there was a brief but failed attempt to break this zone of support, which has subsequently seen the pair rally back up to the 10.5000s level – a natural reaction to a failed breach of support. But it was the first attempt at breaching this support level since mid-October when the pair briefly touched 10.1819 and could well be tested again over the coming weeks as we enter September with high expectations over policy action in the Eurozone and with traders and fund managers returning to their desks, which will see bigger volumes in the forex markets. Under such conditions moves should have more conviction.
If the news flow drives GBPSEK through support, and given the uncertainty at the moment there's no guarantee that it will, a move below 10.00 would represent historical lows for GBP and could see it fall substantially against SEK making for a good long-term short trade. However, even if the world's central banks manage to engineer another rally in risk assets and risk currencies, there's a good chance GBPSEK will eventually return to test this support zone as the fundamentals still favour the Swedish economy over the UK one once the effects of monetary stimulus have warn off.
There are a number of resistance levels clustered around 1.5700-1.5800.