USD/SGD: Bullish Pressure Intact Despite USD Weakness

USD/SGD remain broadly supported despite the strengthening of SGD last Friday on the back of higher than expected private housing prices. This is not surprising considering that Central Bank MAS is unlikely to shift its long-term SGD NEER curve higher due to this new revelation as broad CPI and GDP growth remains firmly on track. Furthermore, as most Singaporean residents stay in public housing, the rise in private housing is not going to be a huge risk factor of the bubbling housing market. As such, it is hard to see the strengthening of SGD anything other than a knee jerk reaction with limited follow-through.

Daily Chart
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From a technical perspective, price is currently being kept afloat by the incumbent Kumo, and a short distance away from the rising Channel Bottom, both of which will help nudge price towards 1.27 in the short-term, and perhaps Channel Top once again. It is also worth noting that USD has been significantly weaker the entire week, losing 1.5% against an equally weighted G7 basket currency. However, there isn’t any significant breakthrough for USD/SGD bears, and prices instead gained slightly on a W/W basis. This suggest that there is something fundamentally weak about SGD, which is most likely related to the industrial and export slowdown spotted from the island state, despite MAS affirming that the 1-3% GDP growth will be met. Furthermore, USD/SGD has been on a strong uptrend since the start of 2013. This uptrend has since grow into a strong bullish Channel and it is likely that technical bulls will push prices higher considering the huge influence technicals tend to have on USD/SGD (due to huge corporate hedgers). Stochastic readings also lean on the bull side, with readings suggesting that a bull cycle from the 1.26 rebound is in play, adding yet one more technical bullish signal.

Given all these, should USD strength return, we could be seeing a strong bullish acceleration in USD/SGD and we could be seeing a quick push towards Channel Top, perhaps taking place with a break of 1.27 resistance and a bullish Kumo breakout.

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