USD strengthened greatly yesterday, sending USD/SGD above 1.230 and beyond the weekly high of 1.2335. As USD/SGD’s liquidity is much thinner than your usual major currencies, it is understandable that the strengthening of USD is more pronounced versus the South East Asian state’s currency, with USD/SGD hourly chart average true range (not shown) doubling after the 2-hour rally (around 1-2 pm EDT).
Since the move above 1.2335, technicals have taken over swiftly, with USD/SGD continuing to trade higher, similar to USD/JPY above 100.0, where price continue to climb despite USD not strengthening any further following pullbacks in US stocks. Early Asian trade added more bullish pressure on SGD as China Central Bank PBOC fixed its Yuan daily reference rate at 0.15% weaker, sending USD/CNY much higher and pulled other Asian exotic currencies such as SGD with it. With today’s rally, price managed to break the 1.235 significant resistance together with the previous swing high back on 2nd May. This movement result in further technical bulls buying, sending price towards 1.24.
Despite the strong rally, the bear trend from Mar highs is still not invalidated. The descending channel is still in play, with yesterday’s rally fitting the bill for a rebound from Channel bottom to Channel Top. Overall pressure remain on the downside especially with Kumo’s Senkou Span A adding further bearish pressure acting as the confluence with Channel Top. Stochastic indicator offer an opposite opinion, with readings pointing higher, suggesting that price may still be able to break Channel top and enter into the Kumo. However even if price is able to enter into the Kumo and break away from the Channel, the downtrend from 1.2525 will still not be invalidated as price would still take reference from 1.235 – 1.245 consolidation zone back in Feb, which makes it a colossus task for bulls to overcome.
Fundamentals does not really provide confidence that USD/SGD will be able to climb higher and break current bearish hoodo. The main reason for current rally is attributed to USD strength derived from higher stock prices, which are not exactly running on strong fundamentals in US. However, bullish sentiment is strongly behind stocks right now, and one would be foolish to go against the larger market considering that market may remain irrational long after we suffer from margin calls.
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