Australia Dollar May Reach 1.12 Per Singapore Dollar, Saxo Says

By Patricia Lui

Dec. 10 (Bloomberg) -- Australia’s dollar may rise to near 1.12 against the Singapore currency should it break above 1.02 and close there, said Saxo Capital Markets Pte, citing technical charts.

Australia’s dollar may be in the process of forming an inverse head and shoulders pattern on the daily chart and will need to close above the so-called neckline of 1.02 to validate the formation, said Jeffrey Halley, head of Asia Pacific foreign- exchange trading at Saxo Capital in Singapore.

“The target would be from the head to the neckline, taking you to at least 1.1180,” said Halley. “That makes sense as the next congestion line is also around 1.1150 to 1.1180 where the cross tested that level four times on the way down before finally breaking it on the fifth round.”

Australia’s dollar traded at 0.9898 to the Singapore currency as of 8:30 a.m. in Singapore, according to data compiled by Bloomberg.

Australian’s currency has plunged 22 percent this year from a close of 1.2623 at the end of 2007 as the U.S. sub-prime mortgage crisis morphed into a global credit crunch and a worldwide recession, spurring investors to flee high-yielding assets as risk appetite vanished.

A head of shoulders is a reversal pattern in technical charts which forms at the end of a rising trend to signal a change in direction. An inverse head and shoulders takes place at the end of a downtrend. The target for both patterns is the length of the head to the base of the neck. The magnitude of that length is added to the point of breakout in the neckline.

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 reporter on this story: Patricia Lui in Singapore at plui4@bloomberg.net.