USD/SGD has been trading steadily lower within a descending channel after breaking the 1.24 level on Thursday. Prices continued where Friday left off, with USD/SGD touching Channel bottom during early Asian trading session, breaking 1.235 support at the same time. Price rebounded off Channel bottom almost immediately, but was unable to break the 1.235 support turned resistance, forming a shooting star bearish candlestick. Current candle affirms the bearish reversal signal with a longer bearish engulfing candle which points to Channel bottom being retest again.
Stochastic reading was hinting at a bull cycle with readings pointing up after exiting the Oversold region, however that was stopped short by 1.235 with Stoch line making a quick U-turn and looking likely to cross the rising signal line now. This suggest that the rebound from Channel bottom has failed, affirming the scenario for a retest of Channel bottom as mentioned above.
Daily Chart is also pointing to the downside with a potential Head and Shoulders pattern forming. 1.235 acts as the neckline and a confirmation for break below the level from a daily chart perspective will push price towards 1.23 quickly, and opening up 1.22 as a ultimate bearish target. However, price may still find some interim support around 1.233 which was the swing high back in early Jan and the swing low during Mid April.
Fundamentally, we are not hearing any more new economic developments for Singapore, however US data on the other hand has been weaker than expected. Hence it is not surprising to see SGD edging out against the greenback during this season, and should US fundamentals do not improve, we could see steady erosion of USD/SGD gains that have been made during January. This week’s FOMC meeting may add more stress to USD as the Fed may go on dovish offensive once again given all the doom and gloom of recent data. Any shift of tone towards the dovish one will almost certainly increase speculation that QE action will increase, a complete turnaround from early months when traders were speculating when the QE tap will be shut.
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