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Short-term Trading Idea FX AUD/SGD – Bear Speculation: a Retreat From the Trend Line

Trading opportunities for currency pairs: the AUD/SGD rate has rebounded to the trend line after 23 days. On Friday the price slid from the trend. A fall of 669 points for the Aussie is expected over the next 9 days. The provisional target is 1.0338, whilst the final target is 1.0064. This scenario will become void when growth exceeds 1.0735.

The AUD/SGD caught my eye at the end of last week. The last time I had an idea for this currency pair was 17th November, 2014. Back then a double bottom model was being formed on the pair. After a renewal of the 1.1346 maximum I expected growth to continue. This scenario didn’t come to fruition and the bear trend continued.

Since the 1.0322 February minimum, the AUD/SGD rate has returned to the trend line. The correction took 23 trading days. Take a look at the daily graph below. In December of last year a similar correctional movement can be observed. Over 23 days the Australian dollar recovered from a minimum of 1.0671 to the 1.0991 trend line. If the sellers are able to strengthen below 1.5848, then expect the AUD/SGD to drop to 1.0064.

You’re probably thinking, “how did he end up with that price level?” Simple: I took the swing from its 1.0991 maximum to 1.0322 minimum, and attached its counterpart to the 1.0735 maximum. The projection falls exactly on the lower limit of the downward channel.

The pace of Australian economic growth in comparison with that of Singapore’s is still too weak. The GDP increase for Australia in Q4 of 2014 was 0.5% and the yearly growth was put at 2.5%. Expectations were around the 0.7% level QOQ and 2.5% YOY. In Q3 the economy grew by 0.4% QOQ and 2.7% YOY.

The pace of Singaporean economic growth sped up more than expected in Q4 of 2014. The county’s GDP growth in Q4 was 4.9%, compared with 2.6% for Q3. Experts expected a 1.6% growth. As a yearly value, the Singaporean economy grew 2.1% over the reported period, whilst its forecasted growth was 1.5%. In Q3 the country’s GDP as a yearly value increased by 2.8%.

It’s expected that Singapore’s economy will have a modest growth rate of 2%-4% in 2015. The RBA forecasts Australian growth in 2015 as lower than 3.0% at 1.9%.

If the Reserve Bank of Australia had kept its rates at the 2.25% level on 3rd of March, the Australian dollar against its Singaporean counterpart would technically look quite vulnerable over a daily timeframe. A double divergence is forming between the AO indicator and the price: a signal indicating a minimum 38% correction from the last drop. Due to this, the scenario could be realized partially or become void. If a partial realization, I’m looking at the formation of a double bottom model at the 1.0322/1.033 level.

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