Activity in USD/SGD has picked up with price breaking higher and closed above 1.23 for the first time since Sep 2012. Unfortunately for the bulls, their hope for a a quick bullish breakout appears to be dashed with price finding difficulty to push 100 pips above the 1.23 line.
1.24 has been acting as a strong support for about 12 months, between Sep 2011 to Sep 2012 when it finally broke to bring us current trading range between 1.215 and 1.24. A tighter consolidation can be drawn between 1.215 to 1.23 (150 pip) range, but that should not distract us from the strong resistance than 1.24 provides.
After briefly touching 1.24 this week, price has came down and forming a shooting star. This shooting star can be confirmed by a red candle next week (preferably long body) for the formation of a Evening Star bearish pattern. If that holds true, we could see USD/SGD heading back towards the 1.215 support. Failure to break above 1.24 may also weigh further to potentially break 1.215 heading towards historical low of 1.20.
Stochastic reading suggest that a top could be in place soon, but that does not necessary equate to price automatically heading lower from here, as readings may only peaked when price reach the 1.25 resistance level.
Hourly chart shows price finding support around 1.236 which is good news for the bulls as the 40 pip drop from 1.24 still looks like a pullback rather than a reversal. A break below 1.236 and subsequently 1.234 may accelerate bearish momentum back towards 1.23. Stochastic reading suggest a lower possibility of this event with readings already in the Oversold region with Signal Line looking to cross the Stoch line for a bullish signal.
Long term fundamentals in USD/SGD hinges more on the fundamentals of USD rather than the fundamentals of SGD, purely due to the huge disparity between the 2 economies. Nonetheless, a weaker outlook of Singapore vs a hawkish FOMC agrees in the overall bullish direction of USD/SGD, which has contributed to USD/SGD’s climb since the start of the year. Watch out for NFP figures this Friday to see if a strong figure can push USD/SGD convincingly above 1.24.