Week Canadian data has been the catalyst for the breakout below 1.22 in CAD/SGD, and we’ve actually seen decent follow-through below 1.22, with price hitting as low as 1.205 yesterday. However, there are concerns that the momentum is slowing down, with candle body length getting shorter each day, and Today’s body appear to be green – the first in the past 8 trading days.
Stochastic indicator is showing reading slowly edging higher from the recent low, which coincide with the onset of the breakout. Indeed it is already amazing that price managed to push lower with readings tilting higher, suggesting that momentum has been falling ever since the breakout on 23rd Feb – and a pullback potentially happening soon.
From the short-term perspective though, there is no evidence of any pullback, with price appearing to continue lower nicely in a step-like manner, pushing lower lows and lower highs with clockwork consistency. Price is also steady under the bearish Kumo which is also providing resistance as recent as Today’s early Asian session. However, despite having no evidence of pullback, the slowing down momentum is evident with the recent Asian session high popping above the downward trendline. Also, we are currently trading above the Kijuu-Sen, which has been providing resistance for price when it was trading lower. Furthermore, though current Kumo is bearish, we are looking at a potential bullish Kumo twist forming as both Senku Span A and B are converging with each other (another sign of slowing momentum). Even if price maintain current levels, we could see price trading above the current Kumo which will provide fresh bullish bias for a case of short-term pullback.
Fundamentally, CAD/SGD’s decline is running more on CAD’s weakness than SGD strength. The Monetary Authority of Singapore has thus far been silent about SGD guidance, but looking at its nearby neighbors such as Thailand and Korea who have rattled off dovish rhetoric, the likelihood of a hawkish MAS runs low. On the CAD front, keep watch on next week’s BOC’s rate decision on Wed and also the Unemployment Data due on Friday. With recent disappointing economic data, Governor Carney may want to end his term with easing talks, before he fly across the Atlantic ocean to join Bank of England for yet more easing actions.
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