USD/SGD – Triangle Alert

Advance readings on GDP for Singapore suggest the period of prolonged weakness is coming to an end. Combined with the US Fed’s ongoing action to weaken the USD, there is a case for short positions in USD/SGD (short USD long SGD), and a triangle on the daily chart could give a precise entry and stop level.

Growth in Singapore has roller-coasted over the last three years. GDP quarterly growth peaked at 38.6% (annualised) in Q1 2010, before dropping to a low in Q2 2011 at -6.5%. Subsequent quarterly readings flipped around until the latest final reading, for Q3 2012, where GDP growth fell to -5.9%. Advance readings for Q4 2012, released in early January, show a return to positive growth at a rate of 1.8%, better than market expectations. If this reading is confirmed by the final numbers due in mid-February, it may indicate a positive turn around, attracting interest in SGD.

The US Federal Reserve has now pumped around $2.75 trillion dollars into the global banking system. While it is true that other central banks are also increasing money supply, this unprecedented increase in USD supply is likely to lead to USD weakness.

These two factors make an examination of USD/SGD compelling:

USD/SGD – Daily

20130124 usdsgd

The triangle suggests USD/SGD will break one way or the other – soon. Trading through the top of the triangle around 1.2300 may be viewed as less attractive, as it appears to go against the fundamental factors mentioned above. Trading through the bottom of the triangle, on the other hand, could be much more interesting.

The beauty of trading triangles is the precision of the signal and the ability to place a tight stop loss order. Traders who favour an alignment of fundamentals and technical may be thinking along the following lines:

20130124 usdsgd tkt

About michaelmccarthycmc

Chief Market Strategist - CMC Markets and Stockbroking Regular on ABC, BBC, Bloomberg, Channel TEN, CNBC, SBS and SKY
This entry was posted in Forex, Market, Trading and tagged , , , , , . Bookmark the permalink.

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