The strong bullish trend that started on 19th appears to have stalled, with a potential top of around 1.257. This rally can be regarded as a technical pullback from the post FOMC drop, and given this backdrop, the failure of bulls to fill in the entirety of the gap is a strong affirmation that overall bearishness is not yet over, and we could still see prices moving back towards the post FOMC announcement low of 1.2422 and potentially beyond.
However, before we assume that bears will simply push lower from here, we need to seek further confirmation that immediate short-term pressure will have legs to run. Stochastic indicator is not truly useful here, as there appears to be a divergence between the past 2 Stoch and price peaks, suggesting that current bearish cycle signal may be impaired. Furthermore, current readings are around the previous trough, hence it will not be surprising to see both stoch curve and price level to turn up higher from here. Preferably price need to break the soft support of 1.253 as confirmation, but given current Stoch levels, it is likely that the Stoch curve would be oversold by then, putting further bearish momentum in doubt. Hence, a better scenario would actually see prices rebounding off 1.253 first but staying under the 1.254 intraday resistance, allowing bears to rest and eventually more space to push lower.
Daily Chart is bearish, with the failure to break 1.257 even more significant compared to the short-term chart. Stochastic readings are in the middle of a bullish cycle currently, but the Stoch curve has tapered flat and is threatening to pull lower. Precedence tell us that readings can possibly form a peak here as we’ve seen other points of inflexion around the 50.0 level before. Similarly, the importance of 1.242 is stronger via the Daily Chart as it has been the ceiling and swing low going as far back as Feb 2013. Hence, expect prices to be able to rebound slightly from there even if overall pressure is extremely bearish.
Interestingly, USD/SGD is not really reacting to recent USD strength seen in the past 2 days, suggesting that SGD is inherently bullish. However, there isn’t any strong reasons for SGD to be strengthening. Central Bank MAS isn’t expected to change anything in the October monetary policy review, while Singapore economy isn’t at its greatest currently, with exports falling and industrial production going through a turbulence season. Hence, it is clear that technicals is having a field day currently, influencing price action greatly. If this assertion is true, then the likelihood of 1.257 holding and reaching 1.242 increases, and we could potentially even see further bearish acceleration if USD start to weaken.
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