During the session on Wednesday, the AUD/SGD pair ended up falling significantly at the beginning of the day only to turn back around and form a nice-looking hammer. This hammer is based upon the 0.99 handle, which has been supportive in the past. The question now begins to be asked whether or not this market can bounce from here significantly. In other words, or we forming a “higher low?”
I’m not ready to say that yet, but the reality is that a lot of the commodity currencies saw a little bit of a reprieve during the session on Wednesday. With that, it makes sense that this market would probably bounce. This is purely an Asian play, as the Australian economy and infrastructure provides a lot of the commodities that Asia uses. On the other hand, the Singapore dollar seems to be thought of more or less as a safety currency and Asia, so this tells me that perhaps risk appetite will strengthen in the short-term.
Playing the bounce
I’m perfectly comfortable buying this market on a break above the top of the hammer. I recognize that getting above the 1.01 level might be asking a bit much in the short-term, but if we do I think we then go to the 1.03 handle. In fact, I think we get back to the 1.03 handle we have to start thinking about whether or not the trend is changing after all. I can’t think of a better place than somewhere in the range of the parity level to look for a trend change.
On the other hand, if we break down below the bottom of the hammer for the session on Wednesday, I feel that this market will drop down to the 0.98 handle, and then eventually the 0.95 level. This isn’t a pair that a lot of you will trade, but quite frankly I think that’s too bad because it does tend to move a very smooth manner and at a slow, steady pace.
