FX Trading Idea – USD/SGD

Technical View
Price reached a high of 1.3940 in late August 2019 and the formation of a Shooting Star candlestick price pattern started the decline which brought price lower to 1.3553 in early November 2019. The base took 2 months to build and the result was an Inverse Head and Shoulder chart pattern. Two days ago, price broke above the neckline of the Inverse Head and Shoulder chart pattern. The inverse head and shoulder chart pattern has a price target of 1.3710. This short term target should be achievable within the next 2 months, meaning by end of January 2020, we should see price at 1.3710.

On a longer term basis, from the low of 1.3505 on 28 of June 2019, price rose to the high of 1.3940 and from there, price decline to 1.3553. This could be the A rally and the B decline of a bigger ABC correction pattern in the process of unfolding. The target for C would be 1.3950, assuming an equal price target.

Stochastic is rising at the moment and has not reached the overbought extreme. There is room for Stochastic to rise and support a price movement higher. MACD is about to turn bullish. The faster line is already above the zero line, while the slower line could be about to cross the zero line soon. MACD is indicating a rising price trend going forward. The important resistance is the previous support turned resistance point at 1.3708. This is also near to the target of the Inverse Head and Shoulder chart pattern. If price is able to move above this resistance point the next price target would be 1.3855 before the final target at 1.3950.

The above table shows the 2 biggest trading partners for Singapore. Both China and Hong Kong accounts for one third of Singapore trading volume. China is involved in a trade dispute with the U.S., which has resulted in a global economic slowdown. If China economy suffers a hit, Singapore economy is also likely to suffer. Hong Kong was Singapore second biggest trading partner. Hong Kong has been caught up in a pro-democracy riot for the past 8 months. Such a situation is likely to affect Hong Kong economy. Again it is likely to lead to less trade with Singapore. Singapore is likely to suffer a drop in trading volume.

While there is increasing hopes of a trade resolution between the U.S. and China, such a situation could result in a stronger US dollar as well. Interest rate differential at the moment is in the US dollar favour. GDP growth wise, the US economy posted a higher number than Singapore.

In view of the technical chart pattern and fundamental view, we believe the USD/SGD is going higher. We would recommend a buy at 1.3635 for initial target of 1.3710. For a 6-month horizon, we are looking at 1.3950. Risk management stop can be placed at 1.3545

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