USD/SGD continued to rally, extending the earlier gains made yesterday following a worsening unemployment rate release. However, if we look carefully at price action during European hours, we would notice that USD/SGD actually dipped lower, during a period which saw Nikkei 225 closing in red for the month of July. Market’s broad risk sentiment was actually down, which can be seen by European bourses gaping lower on open. Hence it is highly interesting to see that USD actually weakened against the SGD when a safe haven currency such as USD should be strengthening in such a scenario. As the sell-off during European hours was caught by the Channel Bottom, we are forced to accept that technical influences are still going strong. This view is affirmed once again when prices pushed towards Channel Top during early US hours. Some may argue that the move was triggered due to US stocks rallying, but the USD and US stock correlation hasn’t been very strong recently, with USD looking more like a runaway train on its own. Furthermore, the rally was also stopped by Channel Top, hence underlining the immense influence the rising Channel has on price action.
Prices did break the Channel when FOMC rate decision came out, weakening USD on a more dovish statement. However, 1.27 remains strong, and prices rebounded higher, only to be rebuffed by the Kijuu-Sen (red line), indicating that Ichimoku influence is strong currently. This hypothesis is all the more important considering that prices is trading within the Kumo right now, with 1.27 the confluence with Senkou Span B support. Stochastic readings is currently pointing lower, but readings are very close to the oversold region, with previous troughs formed last week just mildly dipping in the Oversold territory. This add strength to the 1.27 support, and favors a rebound back higher. However, should price does break 1.27 in spite of all the aforementioned technical indications, we could potentially see a strong breakout leading towards 1.262 as it would indicate an extremely strong bout of bearish strength. Such a break would also most likely entail a shift in fundamental landscape, possibly coming in the form of US ISM manufacturing print later today. Should price remain stable on an expected turn out, it is likely that price may continue to remain sticky remain current Kumo, and we may need to wait for NFP Friday to provide the push needed to break away in either direction. Bear in mind the bias remain on the upside due to recent uptrend and 1.27 strength, and hence a break may require an extremely weak NFP print which may then decrease tapering fears for a bearish USD push.
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