BUZZ-COMMENT-Swedish crown depreciation still a concern for Riksbank

Jan. 27 (Reuters) - The Riksbank meets this week, and expectations are for a 25-basis-point rate cut to 2.25% but the central bank is likely to sound a note of caution regarding inflation and the level of the crown.

EUR/SEK is holding to a longer-term bear trend, but a period of sideways price action has sapped momentum and brought resistance levels into play. Early Monday, the cross climbed above the 10 and 200-day moving averages and the daily kijun line.

The daily chart also has a Jan. 31 11.5038-11.5115 cloud twist, which could attract the cross.

EUR/SEK had been edging lower since peaking at 11.7105 in October and tested levels below its weekly Ichimoku cloud base, 11.4582. However, the cross has not closed below the cloud since October and current price action suggests a breach of the thin cloud's top, 11.4975, is on the cards this week.

The Swedish economy continues to move in line with the Riksbank's forecast and there are indications that the recovery is becoming more entrenched. However, there are also upside risks to the inflation backdrop and a strong dollar, driving the SEK lower, could heavily influence the central bank's position on rates.

A rate cut this week might be the last in the current easing cycle if the crown continues to weaken but this could leave a fragile economic recovery wanting and investor sentiment weak.

For more click on FXBUZ