The Sterling has lost strength against the Singapore dollar at the UK market open on disappointing data, offering up a strong bearish technical bias in the GBPSGD. With no real market movers scheduled for the rest of Thursday, the bias will likely remain as the day matures. Here are the levels to keep an eye on.
First, let’s take a quick look at the action so far. The pair has been relatively flat throughout the week, ranging between 2.0912-2.8903. Wednesday afternoon however, saw the sterling pick up, and the pair traded within a channel to Thursday morning highs at 2.1028.
Just as the pair hit these highs, the UK reported disappointing services PMI data. The index came out at 57.6, falling well short of expectations at 58.1, and the sterling dropped against its Singaporean counterpart to channel support within 30 minutes. A small amount of support held the pair temporarily, but was not enough to prevent a break. Price now sits just shy of this support, and a sustained decline looks likely.
Before the decline resumes, there will likely be a small correction against the SGD. The pair is currently trading just above the 200 SMA, which in combination with the lower Bollinger and an oversold stochastic reading should serve up some resistance. With this in mind, look for a failed retest of broken channel support around 2.0977 to validate a bearish technical bias.
If the retest does not fail, this would not invalidate the bias, but keep an eye on mid-range resistance at 2.0994 to pare gains and resume the downside momentum.
As far as targets are concerned, a close below the 200 SMA would offer up Wednesday resistance as an initial downside goal. Beyond that, the GBPSGD has a pretty clean run to weekly lows at 2.0928. Fresh weekly lows would bring Friday lows into play as a final downside target at 2.0917.
To contact the reporter of this story; Samuel Rae at Samuel@forexminute.com