Exploring two pairs with a common quote currency will reveal more information about the forex rates of the quote currency. How do the rates react? Are the trends similar or markedly different? The only way to understand in full detail is to explore two pairs like the GBP/SGD and AUD/SGD. One pair is in the same region, while the other has two currencies with a longer distance. Is there an impact?
Forex Rates of Great Britain and Singapore
The best way to understand two different currency pairs with a commonality is to look at a three month chart. Take May 2013 to August 2013 for a three month spread on the GBP/SGD. You should be aware of what these two currencies mean to each other from a fundamental standpoint. The United Kingdom does not do exports or imports with Singapore, at least on a basis worthy of note. Foreign investment and forex investment is most often the reason for forex rates to change with this pair.
The three month chart shows a significant increase for the GBP/SGD, where rates climbed from under 1.90 to over 1.97 in about a month span. By mid June a period of consolidation occurred. This consolidation and the peak indicators that occurred signified a reversal of strength for the pair. In mid July the GBP/SGD was under 1.90 again. A reverse head and shoulders appeared before a climb to just over 1.96. The three month forex rates show in roughly a month period the GBP/SGD favoured the GBP gain twice and a gain on the SGD once. You would want to check and see if news was responsible for this or if it was mostly other currencies in the Asian region that caused the SGD rates to change.
Forex Rates Closer Together: AUD/SGD
The AUD/SGD makes things fairly clear for the Oceania and Asian region trades. Singapore was in favour for the same three month period. Rates were above 1.22, but ended below 1.14 by the beginning of August. The downward trend seen in the graph had some consolidation, but it was clear each time that the rates would continue to favour the SGD versus the AUD.
Australia is dependent on a couple of things when it comes to their strength. The AUD can lose strength if Chinese data shows economic turmoil. The AUD/SGD forex rates can also favour the SGD when the USD news is positive. At certain points in the last couple of weeks the Australian news was better, as was the Chinese data. The USD suffered from some poor data. It is why at the end of the three month spread a slight bump in forex rates was seen in favour of the AUD.
Remember in a chart that rates are in the quote currency; however, you also have to remember if rates are going lower it means the value of the quote currency is getting closer to 1.000. Since the base currency is 1.000 in the pairing a downtrend means more strength and an uptrend means less strength for the quote currency.