Short-term trading ideas for SGD, ZAR and NZD
The Singapore dollar has been weakening along with other Asian currencies for a significant period of time. The bull run for the US dollar against the Singapore dollar started in 2013 but the strong move higher began in the summer of 2014. A big correction took place from March to May in 2015 before the bull run resumed.
The bull trend is clearly well established but you can see two red candles in the weekly chart above as we top out at 1.4442. For the past two weeks we have been trading sideways as overbought conditions are allowed to ease. The pair appears to have become a little overstretched in the short term so we will be looking for buying opportunities on any profit-taking in the hope that the bull trend will eventually resume.
The hunt for good support levels and potential buying opportunities takes us to the daily chart.
The recent sideways-trending market could be forming a bullish flag – a period of consolidation before the next leg higher. Traders will have to watch carefully for the breakout above the 1.4442 high and be ready to buy into longs on the break.
However I am hoping we see a retracement to my first support at 1.4325/15 for my entry point. This is just above the two-week low of 1.4303 but also finds moving average and Fibonacci support on the shorter-term charts. I see a good chance of a bounce from here but, if I am wrong, further losses are likely to target the next significant support at 1.4245/35.
USD/ZAR has been on an even stronger bull run. The South African currency has collapsed since mid-2011. You can see in the weekly chart below how it has been a clear path higher for the US dollar with the move accelerating over the past two months as the Fed raised US interest rates and the commodities markets collapsed even further.
This parabolic move is clearer on the daily chart below. On 11 January you can see how a spike up to 17.8284 could not be sustained and finally the pair hit profit-taking. We are now in a consolidation phase, trading sideways as traders decide their next move. The Fibonacci levels are working quite well during this period for short-term day trades. In the chart below you can see how just jumping in and out of these levels would have provided good profits.
As I write we’re holding just above the first main Fibonacci support at 16.70/65. If we start to break lower we should re-test the minor support at 16.35/30 which held the downside last week. By the time we get there the first red trendline support is likely to be intersecting, adding strength to that level. However failure here would keep the pressure on for a test of strong Fibonacci support at 16.00/15.95. This also coincides with the December high, again reinforcing the strength of this level.
The Canadian dollar is another currency which has been losing ground to the mighty US dollar as commodity FX markets take a beating. Again the three-year bull trend in USD/CAD has seen gains in the US dollar accelerate into 2016.
This week we have hit a ceiling at 1.4689 in severely overbought conditions and may require some sideways trading to lower price action over the coming days to ease this scenario. So again we are looking for low-risk support areas to try longs in the hope the bull trend will eventually resume. A look at the daily chart shows some Fibonacci levels to look out for.
The first support at 1.4415 is holding as I write but we do need a short-term correction so a break below here would not be a surprise. We could then target strong support at 1.4250. This level also coincides with the red trendline support, adding extra weight to this area. So there’s a good chance of a bounce from here and perhaps the end of the correction phase.
If we were to see further weakness, however, we could target 1.4110. If we continue lower I will be looking for an excellent buying opportunity at 1.3985/75. This Fibonacci support matches the December high, another good reason to be trying a long position here.
Technical Analyst & Trader
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