Singapore Dollar to Extend Aussie Rally, Strengthen 6%: Technical Analysis

Singapore’s dollar may gain as much as 6 percent versus Australia’s currency in the next four to six weeks after the short-term moving average on a technical chart crossed a longer-term line, according to Okasan Securities Co.

Singapore’s currency may advance to S$1.1386 against the Australian dollar in a couple of weeks and S$1.1057 in four to six weeks, said Tsutomu Soma, a bond and currency dealer at Okasan, citing 10- and 20-day moving averages and a series of numbers known as the Fibonacci sequence.

The Singapore dollar was little changed at $1.1690 versus the Australian currency, or Aussie, as of 12:48 p.m. in Singapore, according to data compiled by Bloomberg. It pared gains of as much 0.6 percent after Australia’s central bank kept interest rates unchanged.

“The chance of breaking the initial target in a week or two weeks is very high,” Tokyo-based Soma said in an interview. “The Singapore dollar is on a long-term trend of appreciation against the Aussie.”

The city-state dollar’s 10-day moving average rose today beyond its 20-day equivalent to form a “golden cross,” which is a bullish signal for the Asian currency, Soma said.

A repeated failure for the Singapore dollar to weaken beyond S$1.2218 last month also signals the currency will advance, Soma said, citing the Fibonacci sequence.

Fibonacci Analysis

The S$1.2218 level is a 50 percent reversal of the Singapore dollar’s gain from this year’s low of S$1.3049 reached on April 12 to this year’s high of S$1.1386 on May 21. A break there will then bring S$1.1057 into target over the next four to six weeks, Soma said.

Fibonacci analysis is based on the theory that prices rise or fall by certain percentages after reaching a high or low. Other significant levels are 23.6 percent, 38.2 percent, 61.8 percent, and 76.4 percent.

On the chart, S$1.1057 represents a 50 percent retracement of the Singapore dollar’s decline from a high on Oct. 28, 2008, of S$0.9066 to the April 12 low on a separate Fibonacci chart.

In technical analysis, investors and analysts study charts of trading patterns and prices to forecast changes in a security, commodity, currency or index.

To contact the reporters on this story: Yumi Teso in Bangkok at yteso1@bloomberg.net

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