Decline In Exports Driving SGD Weaker

Singapore’s trade agency International Enterprise released the latest April Trade data about 1 hour ago, with headline Non-Oil Domestic Exports M/M coming in at +1.1%, a sharp decline from March’s 8.0% growth. However, Y/Y continue to look weak, standing at -1.0% but nonetheless the rate of decline appears to be slower now, comparing with March’s -4.8%. In fairness, numbers appear healthy, until we realize that the nominal export figure actually dropped, with April actual amount at 14.5 billion vs March’s 14.8 billion. As the M/M figures are seasonally adjusted, the nominal decline transformed to a positive gain, removing the shine off the healthy figures we’ve seen earlier.

Hourly Chart

USD SGD continue to push higher after the news, relieving itself from the bearish pressure that was threatening to re-test 1.25 support and potentially forming a Double Top pattern. With the push above 1.253, the probability of a Double Top has been negated and price is now trying to break into new consolidation zone above 1.253 which can be confirmed should the previous swing high around 1.254 is broken.

Stochastic readings is in favor of a bullish breakout from here, with readings reversing higher and invalidating the bear cycle that was in play. However, conservative traders may wish to seek further confirmation of a return to Bullish Cycle which could be in the form of readings clearing the previous inflexion point around 65.0.

Daily Chart

Daily Chart is also heavily in the bulls favor with price printing a new 2013 high with today’s move up. With this move, all lingering doubts about bearish pressure from March High to May Low is gone, and the Head and Shoulders Pattern with April’s right shoulder is confirmed to be invalidated. Stochastic readings are finding a new lease of life, continue to point higher after threatening to head lower just a few days ago. However, with Stoch readings being firmly Overbought, it remains to be seen whether price will be able to continue its strong bullish momentum with 1.26 and rising trendline confluence hanging over its head.

Fundamentally, Singapore’s economy is not doing well. Exports to United States and China rising, while exports to Euro-Zone fell 13.4% but still a lesser percentage compared to last month. These figures do not explain why Electronics and Pharmaceuticals fell 9.0% and 11.8% respectively. Certainly the decline in these 2 products appears to be an issue of competitiveness and not an issue of global economic slowdown. And should this trend continue, we could see SGD continue to weaken (even if MAS does not intervene). Couple this with a strengthening USD, the outlook for USD/SGD will be highly bullish, in line with what technicals are showing us.