USDSGD “very high”. “Anything can happen”

Good day all,

The recent sell-offs in equity is driving money to the safety of US Dollars. I managed to catch some profits on the back of US dollar strength. Now, this post is concerning the USD/SGD pair. In my last post on it, I identified a small parallel channel towards the downside. This channel gave me one last short set-up, before it got violated towards the upside – goes to show how important it is to snatch profits when trading small channels.

In the chart below, you will see a large downward parallel channel with a centreline. The downward bias depicts general bearishness of the USDSGD over the last year or so. Also, I have fibonacci retracements study taking the high at 1.3100 and the low at 1.2400. The 38.2% retracement level came into play quite nicely during one period (in blue border colour). However, the recent buying pressure proved too strong for it. USDSGD even broke through the 200-day MA very strongly. Immediate resistance is the 50% retracement line at 1.2750. Although I  like following the trend (short-term downtrend as of now) when trading, I am looking for short set-ups in USDSGD. Stops will be, as usual, crucial in shorting USDSGD. If you take a look at the left side of the chart, you will see a 1000-pip rally (yes, 1000, not 100) by USDSGD. In a time like now, if flight-to-quality continues, the greenback is just going to continue on higher. Chart-wise, am I seeing that? Yes, there is more room for upside. And why?

One, the downward parallel channel tells me that resistance is overhead at about 1.28800 (high 1.28s). Two, the 61.8% level – which will come in play if USDSGD stays above the 50% level, is at 1.2830. Three, the triangle formation that is in play shows resistance at the 1.2900 region. I want to say some words on the triangle pattern. The symmetrical triangle was identified quite a while ago. A downward breakout occurred, and downside we got. As with all triangles, whether in a stock chart or a forex chart, support/resistance levels can be established based on the pattern. They way I was taught, and continue to use, is to establish support/resistance at the last trough of the triangle. I circle the last trough of the triangle in the USDSGD in pink colour. That area is a good 400 pips above 1.2900. The reason I am highlighting this area now is because price is going up against the trend expected. Coming out of a triangle towards the downside means that we establish a downward target, and look for a downtrend. In this case, USDSGD is retracing back up. So we watch for the resistance – provided by the last trough in the triangle. Finally, major recent highs are at 1.3000-1.3100. As we get closer to the resistance levels overhead, I will be getting ready short set-ups, hence my post title “USDSGD very high”.

At this juncture, I want to address something. Those who do not trust technical analysis sometimes criticise how we chartists use terms like “overbought/oversold”, “too high/low”, and ” overextended”. I have friends who, after picking up a growth investing or general fundamental analysis book, rebut me when I say things like how a security cannot go above/below a certain level because of technical reasons. Of course, who is to say USDSGD cannot breach 1.3100. Anything can happen, especially in the forex market. But the thing is, if a trader is going to say anything can happen all the time, then how on earth are you going to enter/exit the market? So, yes a chartist like me will say things like how the USDSGD should not be breaching major resistance at 1.3100. But, what I mean by that is that overbought regions are where my short entries will be at, together with stop-loss orders lined up overhead.

In conclusion, I will be looking for short opportunities in USDSGD, bearing in mind some more room for upside.

All analyses, recommendations, discussions and other information herein are published for general information. Readers should not rely solely on the information published on this blog and should seek independent financial advice prior to making any investment decision. The publisher accepts no liability for any loss whatsoever arising from any use of the information published herein.

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One Trackback

  1. […] I have an analysis of USDSGD for today.  Look at my last post on USDSGD here: https://technicalanalysistalk.wordpress.com/2012/05/20/usdsgd-very-high-anything-can-happen/ […]

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