USD/SGD: Strong Reversal Lower Could Ignite Other Bears

Traders who have not looked at their screens yet today may be surprised to see that the USD/SGD has reversed lower since late yesterday, and has essentially wiped out a lot of the short-term bullish momentum that sprung forward last week. The USD/SGD is near rather intriguing support and, if the Forex pair is able to penetrate the 1.32210 to 1.32180 junctures lower, traders should then expect additional volatility.

The USD/SGD is within the midst of a long-term bearish trend, but trading the past week has challenged speculators who had grown accustomed to wagering on downside momentum. Today’s sudden twist of bearish trading is a reminder not only of the long-term trend, but also the risks that Forex trading can deliver and why it is important to use risk management when speculating.

The question traders will ask is if this sudden downturn is a signal that the bearish price action of the USD/SGD can be depended on. The simple answer is no, Forex rarely makes life easy for speculators and constantly challenges perceptions. However, the ability of the USD/SGD to rapidly move lower this morning is proof that we have not seen the last of strong results, and the long-term bearish trend needs to be not only respected, but quite possibly pursued.

Traders need to gauge risk scenarios carefully and consider which side - selling or buying - of the USD/SGD carries the most potential for a solid move. Some traders may be tempted to look at the short-term reversal lower and wager against it and buy the USD/SGD. However, going long the Forex pair also means a trader is wagering against a bearish trend which has been consistent. Traders need to understand that reversals certainly take place, but if there is a perception that the USD/SGD has greater ability to track lower, the wise thing to do may be to sell the pair and use carefully selected stop loss ratios to guard against intraday movements.

Cautious traders may seek further downside momentum to indicate that the USD/SGD has the potential to produce further downside action. Support around 1.32210 could prove vulnerable and, if it falters, speculators may want to pursue selling positions and target levels below which were traded early last week and could become a focus for trading systems.

Singapore Dollar Short-Term Outlook:

• Current Resistance: 1.322100
• Current Support: 1.32150
• High Target: 1.32610
• Low Target: 1.31800