The US dollar initially rallied against the Singapore dollar during the trading session on Thursday but gave back the gains as the 50 day EMA above continues to offer a significant amount of influence. When you look at the candlestick for the day, it is essentially a shooting star that is sitting just above a major support level. If we can break down below that major support level, we could see this market break down rather significantly.
For the sake of simplicity, I look at the 1.32 level as an area that is holding up the market at the moment. If we were to break down below there, I believe that we would see a continuation move, perhaps opening up a very quick move to the 1.30 handle underneath as it is a large, round, psychologically significant figure. That being said, I think we go further than that, but we will almost certainly see a little bit of a reaction.
At this point, the 50 day EMA is obvious resistance, but then again so is the 1.33 handle. Keep in mind that this pair does tend to move somewhat slowly and does tend to trend for very long periods of time. The market certainly looks as if one that you should be fading on rallies, because the monetary policy between the Federal Reserve and the Monetary Authority of Singapore could not be any further apart. Singapore believes and what one would consider to be the closest thing to “hard money” that we have at the moment, so in comparison to the Federal Reserve they will almost always be thought of as much more hawkish.
Because of this, I do like selling this pair in general, but I also recognize that you have to pick your point. A move to the upside certainly could happen as we have seen a lot of support in this general area just below, but I think it would probably have its day somewhat numbered and of course plenty of resistance above to keep this market negative. Furthermore, as long as we continue to see the loose monetary policy coming out of the Federal Reserve, a “sell on the rallies” type of market probably continues to stick, with a trend change not even thought of until we break above the 200 day EMA which is just above the 1.34 handle currently.
