After a huge sell off on 16th April which saw USD/SGD fall from 1.239 to 1.232, price has recovered significantly, climbing back up to an Asian high of 1.237 before trading back lower towards 1.235. Early Asian rally was attributed to the successful Japanese Government Bond auction that pushed USD/JPY higher, with the spillover of USD strength pulling USD/SGD higher.
However, the rally stopped short of crossing the 1.237 barrier despite managing to breakout of the current Kumo. Ichimoku was pointing to a USD/SGD bullish scenario with a bullish Kumo Twist hours before the Kumo breakout occured. Bulls will be disappointed that they were unable to hold onto 1.237 level which would have given them the platform to seek 1.239 as it enters the consolidation zone that was in play before yesterday’s bearish breakout. With price trading lower, the bearish breakout will remain in play, which is currently in line with Stochastic readings pointing lower. This brings 1.235 support in back in focus again, with a break of 1.235 likely to coincide with a bearish Kumo breakout if it happens during early US trading hours today. This could result in acceleration towards 1.232 and potential lower for a continuation of the bearish breakout seen yesterday.
However, it will not be surprising to see 1.235 holding with Stoch readings closing in on Oversold regions. In this scenario, a rebound from 1.235 may allow price to retest 1.237 once more, giving bulls one more shot to break 1.237. As long as Bulls manage to stay above 1.236, the possibility to test 1.237 will be there especially with a rising Kumo expected to nudge price closer towards 1.237 tomorrow if price levels stay afloat.
Daily Chart shows the significance of 1.235 as a support/resistance level. However, the line 1.235 is not absolute, as the entire band between 1.235 – 1.236 can be construed as the lower support region for the consolidation zones found in Feb and early April 2013. The difference in 10 pips could mean that yesterday’s candle has confirmed the breakout below current support, or invalidating the breakout suggesting that price could trade back towards the top end of current consolidation zone. With so much as stake based on so little, traders may wish to look at further confirmation for a breakout/rebound. Perhaps current candle may help to shed more light on direction. Stochastic readings suggest that a rebound scenario is likely based on the current readings. However, the divergence between price action and stoch troughs tells us that we may want to filter out the bull cycle signal. Worst case scenario may have us see a doji candle (which represents uncertainty) at the end of today, which may result in yet more uncertainty on Friday as speculators may flee with G20 meeting starting.
With MAS policy decision out of the way (the next one is in October), USD/SGD fundamental direction is more likely to weigh on US economic health more so than Singapore’s. Traders should continue to keep watch on US fundamentals that will affect USD tremendously especially since market is speculating when QE3 end date will come.
This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.