Oct. 21 (Bloomberg) -- The U.S. dollar may decline against its Singaporean counterpart after dropping below a key support level at S$1.2596, BNP Paribas SA said, citing trading patterns.
The level is the 50 percent Fibonacci retracement of the dollar’s advance from a low of S$1.1992 reached on July 27 to a high of S$1.3199 seen on Oct. 4, according to data compiled by Bloomberg. The currency sustained losses below this level on Oct. 17, when it fell to as low as S$1.2571, and on Oct. 19, when it reached S$1.2577.
“The 200-day moving average at S$1.2478 is quite key,” said Thio Chin Loo, a Singapore-based senior currency analyst at BNP Paribas. “If it breaks the 200-day average, it opens up further downside toward the 100-day moving average” at S$1.2365.
The Singapore dollar last touched S$1.2478 on Sept. 19 and the S$1.2365 level was previously seen on Sept. 16. The dollar fell 0.3 percent to S$1.2714 as of 8:24 a.m. Tokyo time.
The currency will also “probably test the support level at S$1.2453,” Thio said, referring to its 61.8 percent retracement. “The bearish signals are still there.”
Fibonacci analysis is based on the theory that prices rise or fall by certain percentages after reaching a high or low. A break above resistance, or below support, indicates it may move to the next level. Support refers to an areas where buy orders may clustered. Resistance is where there may be orders to sell.
In technical analysis, investors and analysts study charts of trading patterns to forecast changes in a security, commodity, currency or index.
--Editors: Nate Hosoda, Rocky Swift
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