USD/SGD Divergence Cues Swing Trading Opportunity

Swing trading remains one of the most reliable approaches to trading today’s markets – even with the current volatility as untamed as it is.  There are a number of specific approaches to the general idea of swing trading – this article uses the idea of ‘divergence’.   A divergence occurs when actual price activity and price based indicators begin telling different stories; for instance, higher highs in the price chart contrasted with lower highs on the indicator.  These divergences often point to a change in the underlying activity which isn’t immediately apparent to the human eye.

 

Walker England , Trading Instructor,

October 6, 2011

 

USD/SGD Divergence Cues Swing Trading OpportunityUSD/SGD Divergence Cues Swing Trading Opportunity

USD/SGD Set to Swing from 1200 Pip Retracement

The USD/SGD has been one of the strongest market trends. The pair has steadily made lower lows dating back to the March 2010 high at 1.557. Recently the pair has reversed. Since July 2011 the pair retraces 1208 pips from its low of 1.1988 up to the October 4th high of 1.3196. This move against the trend offers traders a chance to rejoin the broader daily trend and potentially swing the pair back with a selling bias.

 

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USD/SGD Divergence Cues Swing Trading OpportunityUSD/SGD Divergence Cues Swing Trading Opportunity

Fundamentally, the USD remains weak. Unemployment is still residing at 9.1%, with most market participants predicting the rate to not to change for Friday news event. Expectations can be found updated on the DailyFX economic calendar. As this news week unfolds we will look for chances to enter in the market with our daily trend.

Taking Price in to an 8HR chart we see divergence forming on the USD/SGD. Divergence can be seen by noting the USD/SGD created a higher on October 3rd. The MACD (Moving Average Convergence Divergence) Indicator has created a lower low during the same time frame. Traditional divergence, as represented by a separation of price and an indicator, is a tool utilized by swing traders looking to find a top / bottom after a period of price volatility.

My preference is to sell the USD/SGD in the direction with our broader daily trend with entry’s placed under 1.3000. Stops should be placed over resistance at 1.3250. Limits should be placed at 1.2500 for a clear 1:2 risk reward ratio. A second target may be placed at the 200 MVA on our 8Hour chart near 1.2290.

Alternative scenarios include price breaking through resistance found from the December 2010 high.

 Walker England contributes to the Instructor Trading Tips articles .To receive more timely notifications on his reports, email wengland@fxcm.com to be added to the distribution list.

Read more: http://www.smh.com.au/business/daily-forex/usdsgd-divergence-cues-swing-trading-opportunity-20111006-1la1o.html#ixzz1agaB1rTA

Thursday, October 13th, 2011 Education, Forex Trading

1 Comment to USD/SGD Divergence Cues Swing Trading Opportunity

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  2. MU 60M trend now up | Wall Street Stocks on November 8th, 2011

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