USD/SGD Technicals – Round the 1.24 mulberry bush

1.24 remains a strong resistance, but there are signs that the tough nut is cracking.

Following a less dovish FOMC minute overnight, USD/SGD rallied higher and touched 1.24 briefly. That is not a surprising development as USD strengthened on risk-aversion moves with S&P 500 clocking in the largest single day loss in 2013. What is more surprising is that USD/SGD went lower immediately after price tagged above 1.24, showing the immense amount of offers above 1.24 . The move back below 1.24 at 9.00am Singapore time coincides with the sell-off of Asian stocks, which are now trading lower with N225 -1.39%, HSI -1.67% and even Singapore local Straits Time Index falling  -0.58%. This move is not supported by fundamentals, but purely on speculators betting on the resilience of 1.24, and as such we saw price turned back towards 1.24 just as quickly and we managed to break 1.24 once more.

Hourly Chart

We’ve managed to trade slightly higher than Feb 16’s high, which is an encouraging sign for the bulls. However the subsequent bearish candle that follow reduce the shine of a new high being forged. From here, 1.24 still does not look convincingly broken as we are barely 10 pips away from the level. Stochastic is also hinting of a new top forming with Stoch and Signal line closing into each other and threatening to cross. Even though the number of sellers appears to be thinning (observable by the relative ease of how price moved up above 1.24 the 2nd time round today), all the closeted bears may reappear once more if they sense weakness in the bulls to hold onto 1.24.

Daily Chart

Overall, trend of USD/SGD still look higher as long as 1.235 holds. the 38.2% Fib retracement will also provide some support beyond 1.235 as it is the confluence with the previous swing high in Oct 2012. Stochastic suggest a bullish scenario with Stoch/Signal line crossing and readings looking to have formed a recent trough (when price hit 1.235 support as well).

Fundamentally, a less dovish Fed will continue to elevate USD/SGD and other USD pairs. However, unlike all the other Central Banks in the region, the Monetary Authority of Singapore has thus far been silent about policy direction. Hence more weight will be placed on MAS’s April’s meeting, from which we will be able to see if MAS will revert to type and dish out the same “ease if necessary” stance that Bank of Thailand, RBA, BOE and RBNZ are adopting.

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