luke1827
Long

Why it is a good idea to trade USD/SGD using channels and slopes

140 1 1
"Unlike most major economies, Singapore’s central bank manages the exchange rate, rather than the interest rate, and has done so since 1981. A small and open economy, Singapore is highly dependent on trade. The Singapore dollar’s strength relative to other currencies can thus influence prices significantly. The exchange rate is also relatively easy for the central bank to control – by buying and selling Singapore dollars. By choosing to manage the exchange rate, MAS gives up control over domestic interest rates. As capital flows in and out freely, interest rates are largely determined by foreign interest rates and how investors expect the Singapore dollar to move" - Teh Shi             Ning and Kelly Tay

Every April and October, Singapore's central bank can decide to change none, one or more of the following "policy levers".

They can:
1. Change the width of the channel an SGD currency pair is trading in

2. Change the slope of the channel an SGD currency pair is trading in

3. Shift the channel, or "stair step" the channel an SGD currency pair is trading in

Please read the following article for more details:
http://www.businesstimes.com.sg/sites/default/files/attachment/2014/10/13/monetary_policy_v2.pdf

From the chart, I show a potential trade set-up that looks to take advantage of up-sloping channel setup, given that Singapore's central bank has also announced easing of monetary policy 2 days ago.

Entry: 1.34237
SL: 1.33736
TP: 1.36286
luke1827 PRO
2 years ago
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