After clearing 1.26 and pushing above the rising trendline, price has tagged 1.27 briefly before coming down significantly to 1.26 once more. However, overall bullishness prevail, with price managing to move itself up above the rising trendline, making the current bullish breakout intact.
This suggest that price may still be able to use current rising trendline as support, and a move towards 1.27 and potentially beyond remains in the cards. This is important because bears have basically wasted a perfect opportunity to go for the jugular when we were trading below 1.26 – Stoch readings were ready for a bearish turn with a Stoch/Signal cross, and a sustained move below the rising trendline will be more than likely to push Stoch readings below 80.0, and usher in a new bear cycle which could potentially bring us to 1.255 and perhaps lower if the bull trend from Dec has been invalidated.
However that obviously didn’t happen, which brings us to our current situation – bullish breakout intact, yet price doesn’t look truly bullish.
This issue is more obvious via the short-term hourly chart, where price has been consistently posting lower highs (and perhaps lower lows) since 23rd May. Stochastic on the hourly chart is also heavily overbought, looking likely to head lower with a stoch/signal cross similar to Daily Chart. There are positives though, with price trading above 1.2625 support, current decline has taken a backseat. It is important to note though that the recovery back above 1.2625 is wholly attributed to the surprise rally in USD/JPY during early Asian session today. It is clear that the effect is running out now, especially since price wasn’t even able to retake Monday’s high. Therefore it will not be surprising to see bears pushing below 1.2625 once again.
It remains to be seen if price may be able to break 1.2625 YET fulfilling the minimum requirements to keep the bullish breakout validated. Therefore, traders should not marry themselves to current bullish breakout, but perhaps give leeway and allowances that current breakout may fail.
Fundamentally, traders should continue to watch out for USD strength as that will continue to have a profound impact on USD/SGD. SGD strength may be less important moving forward since the Central Bank MAS will most likely not change in the short-term with the next policy meeting coming in October. Some traders may feel that SGD may gain fundamentally due to better economic data that came up recently, but it is also worth noting that USD/SGD did touch 1.27 when the better industrial production and GDP data were released last week. As such, it seems that USD strength trumps any other factors in current USD/SGD direction, at least currently.