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USD/SGD Key Reversal Day Heralds Rebound

05 June 2009

The Daily charts of the markets we follow in the FX TRADING GUIDE are littered with Key Reversal Days and Almost-Key Reversal Days from earlier this week. We’ll be looking at all of these in next week’s Guide, but here we have chosen USD/SGD as an example – rebound is on the cards.

MONTHLY CHART: Recovery from the 2008 low eventually neared a 61.8% level before pulling back. We had been uncertain whether the 1.4153 Dec-08 low would be retested and, currently, support could emerge above this, just ahead of the 61.8% retracement – see Daily chart below….

DAILY CHART: The recent break below the bull channel base projection had kept us bearish – we were looking at a Fibo projection at 1.4235, around the 61.8% level on the longer term chart. However, in this week’s Guide we had noted the positive divergence on the RSI, indicating bull fatigue. Wed’s Key Reversal Day, coupled with how the chart structure looks since 1.4747 18-May high (typical of a final leg), improves the scope for a rebound now. Keep in mind the usual retracement levels as potential resistance – 23.6% at 1.4620 and the 38.2% at 1.4805, with that 1.4747 high also offering a s/term hurdle. This bull scenario would be negated by a move below the 1.4324 03-Jun low.

Buyers on dips (1.4450-1.4400 area?) have a clear risk level in the 1.4324 low, initially targeting around 1.4600 for partial profits, and then the 1.4745-1.4800 area for more, raising stops to at least cost along the way.

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