Price traded higher early today after prices managed to close above the 1.237 resistance. There are reports of Singaporean banks buying USD/SGD higher, which acted as the early driver to send price above the recent 16th Apr swing high and 1.24 round number.
Stochastic readings are heading higher right now after threatening to form a stoch/signal cross earlier. Similarly, price was trading below the 1.2395 resistance at one point and was looking likely to retest 1.237 once again before additional wave of bullishness during early European hours reversed the bearish scenario. With the break of 1.24, the recovery from 17th April low resumes, and we should be able to find bullish acceleration after the current breakout has been confirmed.
Using the daily chart, we can see the importance of price clearing the 1.235 level resistance/support. If this week ends positively, a morning star candlestick pattern will be formed and that will open up the full 1.31 swing high back in Oct ’12 as possible bullish objectives. There are still interim resistances such as 1.25 and 1.27 in the form of past consolidation zones from which price action may take reference from. Stochastic readings are less bullish with current bear cycle still in play. Stoch line and signal lines are currently converging into each other right now, suggesting that an interim trough can be possibly formed, which may be in-line with a bullish break of 1.25 resistance where the trough is fully formed and confirmed in line with a 1.25 break, suggesting that price may have a short-term bullish breakout from there on.
However, considering the overall bearish price action since Jul 2011, bull traders may need to be aware of the risks involved in ta counter-trend trade. As long as price does not break 1.31, the overall long-term bearishness will continue to weigh. And it seems that this opinion is not just shared amongst speculators, with corporations spotted hedging their USD exposures by selling USD/SGD above 1.25 previously. With real money flow supporting a stronger SGD, it becomes much more difficult for USD/SGD to push higher. Throw in USD weakness into the mix, bulls have an uphill task literally to defeat all the interim resistances mentioned previously.
Fundamentally, with MAS decision (or non-decision) out of the way, SGD has very little threat of Central Bank intervention between now till Oct (MAS next scheduled meeting), this does not mean that market will certainly favor the bears, but it is one less reason for bears to fear if they hold onto SGD for the longer term.
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