USD/SGD Technicals – 1.242 Test Redux

Prices traded higher during US trading session yesterday after bears tried to retest the 1.24 resistance turned support. However, 1.242 remain firm and we saw price falling back sharply once again during today’s Asian session as price dropped back to 1.24’s familiar arms once again.

Perhaps the latest FX reserve figures from Monetary Authority of Singapore (MAS) can help to address the sell-off. Preliminary March figures came in at 258.17 Billion USD, slightly lower than Feb’s figure of 259.14 Billion USD. MAS does not provide any statements or clarification for any change in FX reserves, but certainly it is clear that MAS has a net loss of FX reserves, which translates to a net SGD purchase during the month of March. This could actually mean that current USD/SGD levels may be reaching the upper end of the undisclosed SGD trading band, and MAS is actually strengthening SGD by clearing FX reserves and buying up SGD instead. Market latched onto the news and traded USD/SGD lower towards 1.24.

Hourly Chart

Besides SGD strengthening factor, Ben Bernanke was also doing his part to weaken USD. During his latest statement, Bernanke lent his support to BOJ’s stimulus effort, saying that the BOJ efforts will help global growth. He went on further to suggest that more stimulus from different Central Banks is ideal as these stimulus efforts are “mutually reinforcing” – defending Fed’s past QE actions and paving the way for continued QE purchases and deflecting criticism about US “unfair advantage” garnered from all the QE actions.

It is worth noting that both news event are not earth shattering – and USD/SGD did not collapse significantly, but merely falling around 30 pips this morning. This suggest that technicals may still play a strong part in the short-term especially with no majors news in the next 1-2 weeks. Stochastic readings seem to be forming an interim bottom as price gather support from 1.24 and eventually from the rising trendline. This increase the likelihood of price bouncing back and retest 1.242 once more. However without any strong fundamental push, it is hard to imagine USD/SGD breaking 1.242 to trade towards 1.25 especially when BOJ’s spillover has failed to do exactly that.

Daily Chart

Daily Chart continue to look bearish despite price trading higher since early April. Stoch readings are pointing higher, which suggest that price may rise further but a move back above 1.245 and also back into the rising Channel appears to be unlikely for the same reason mentioned above. Instead of establishing new bullish bias, price rally may pewter out closer to the Channel Bottom, ending up affirming the bearish breakout rather than invalidating it. With that being said, bears may not have an easy time either with bearish acceleration only likely to increase after 1.235 has been breached. In the meantime, price may continue to lack direction within the Feb consolidation range, implying that technical lines may play bigger roles in the short-term from now till MAS’s scheduled meeting towards the end of April.

More Links:
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