Hello all,
In February, GBPSGD broke through major support in the region of 1.9300 – 1.9400. To put this significant move into perspective, GBPSGD has been in a long-term downtrend because of a strengthening Singdollar. In recent years, 1.9300 – 1.9500 provided us with a strong floor. But this floor caved in, and GBPSGD fell down to the 1.8600 region in weeks.
GBPSGD’s decline slowed in the last few weeks, and a typical pattern emerged. GBPSGD made two dives to form a classic “W” pattern. The double bottom is not symmetrical, but a lopsided pattern works fine too. Right now, GBPSGD is testing the neckline of the double bottom. For a swing trader, what I see now is a simple correction from the sharp pierce of the long-term support (red line). How far and long will the correction take? It varies a lot so there is no definite answer except to wait and let the market run its course. If you use the pattern for a target, the correction should go as high as 1.9200 – where the 50-day MA is. This double bottom can also be seen as a broadening wedge pattern. Usually, such patterns come with indicators painting very bullish convergence signals. What this means is that while price makes a lower low (hence the lopsided double bottom in this case), indicators are making a higher low. This is a bullish indication.
So, I think I have a strong case for near-term buying pressure in GBPSGD. However, I am thinking of a long-term position trade on continued strength of the Singdollar against the pound. As such, I am looking at this as a window of opportunity to build a short position. Let us see how this goes.
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