The Australian dollar looks like it could be set for a medium term downside reversal against the Singapore dollar, as the shorter term technicals present a classical charting pattern in the AUDSGD.
The pair ranged throughout the majority of last week, as a shortage of any real market movers failed to offer up any major AUDSGD directional strength. On Friday however, resistance at 1.1661 served up a strong corrective bounce, and the Aussie dollar spiked to weekly highs at 1.7286, reversed to 1.1675 and closed the week out at 1.1683.
As the markets opened on Monday, the bullish AUDSGD momentum resumed and the pair once again rose, falling just shy of Friday highs to find resistance at 1.1717. A subsequent reversal has formed a double top, and a break of the patterns neckline would offer up a strong bearish bias as the day, and perhaps the week, matures.
The pair is currently trading at the neckline, so keep an eye on action around this level to form a bias. A break below 1.1675 would validate the pattern, and offer up a pattern completion target at 1.1640. The more risk averse trader may consider a two target approach, taking some profit off the table at the combination of previous support and the 200 period moving average at 1.16617.
One thing to bear in mind is that the stochastics currently show the AUDSGD as oversold, meaning the pair may be set for a small correction before the pattern validates and the sellers take control. Look to in term resistance at 1.1684 to contain the correction, with a failed retest of this level supporting the bearish AUDSGD bias.
In addition, keep an eye on the fundamentals as the day draws to a close. The National Australia Bank is set to release its monthly business confidence survey at 02:30 GMT Tuesday morning. The release could offer up some volatility, and reverse the short to medium technical bias in the AUDSGD.
To contact the reporter of this story; Samuel Rae at Samuel@forexminute.com