The consolidation around 1.265 continues, but this time round we are getting closer and closer to the rising trendline, and eventually something gotta give – either price will break back below the rising trendline, exposing 1.252 and potentially 1.243 as potential bearish targets. Alternatively, if the rising trendline holds, we can expect price to launch the 3rd attack towards 1.27 and hopefully break the significant resistance convincingly once and for all.
From a price action perspective, a break below the trendline does not necessary invalidate current rally, as the trendline is merely a structural support, and not representing the overall manner price has been moving since 2013. The fact that price broke the rising trendline back in April attest to this, and it is through the sudden meteoric rise of USD strength that allowed USD/SGD to trade above the trendline in the first place. Hence it is also not surprising to see that Stochastic readings are heavily in the Overbought region as the bullish momentum has been going on full throttle in the month of May.
Currently, Stochastic readings are looking likely to break the 80.0 level. It is highly likely that such occurrence would be in line with a break of the rising trendline, which adds weight to the pullback scenario, though a full reversal may only look more plausible should 1.252 and 1.243 are breached.
Hourly Chart shows an interim floor around 1.2625. With Stochastic readings in the Oversold region, the strength of current support and confluence with the rising trendline is increased. Nonetheless, in the event of this level being broken, 1.258 may provide yet another interim support level against further sell-off for the time being.
Fundamentally, the reason why USD/SGD is coming down can be largely attributed to the decline in USD. It seems that US futures are spooked by the declining Nikkei 225 which closed 5.15% lower today, and that in turn pushed USD lower and USD/SGD down. The question we need to ask now is whether this decline in USD is a short-term blip or a longer-term correction. To answer this question fully, traders will need to continue to keep a close watch on US fundamentals and also look for signs of reversing momentum from both S&P 500 and Dow Jones Industrials for early signs of USD pullback which will certainly impact USD/SGD greatly.
This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.