USD/SGD: Pushing Lower On Potential MAS Hike

Latest numbers about Singapore Housing Market is in- Q3 Private Home Prices grew 0.4% Q/Q but HDB (public housing) resale prices shrank 0.7% during the same period. So is Singapore housing market cooling or is inflation risk continuing to roar?

As most of the Singapore citizenry resides in public housing projects, a slight fall in HDB prices is actually good news as it alleviate the cost of living and allow for a slightly better debt/income ratios. On the other hand, the increase in private home prices suggest that economy in Singapore continues to be strong. As a large part of private properties ownership belongs to non citizens, the increase in prices can also be seen as a sign that foreign investments (FI) are continuing to pour into Singapore’s economy – a unique case compared to other Emerging Markets where money is actually flowing out.

Hence, it is not surprising to see USD/SGD pushing lower as SGD strengthened from the news. With the October monetary policy announcement coming up in 2 weeks time, MAS may be able to use this opportunity to drive SGD higher in order to limit inflow of FI into Singapore and prevent further inflation. Furthermore, SGD has been depreciating heavily and it has been rumored that we may be already trading near the top end of MAS SGD Nominal Effective Exchange Rate, where MAS has mentioned 6 months ago that their preference is for a slightly appreciative NEER curve. With FI continuing to pump in despite recent cooling measures, MAS may need to steepen the NEER slope in order to make it less attractive for foreigners to inject their funds into Singapore.

Hourly Chart
USD/SGD Hourly" title="USD/SGD Hourly" src="https://d1-invdn-com.akamaized.net/content/pice12dfc843b5ab137e24e9ead4738a515.PNG" height="324.19310344828" width="undefined">
From a technical perspective, this is also a good time to short USD/SGD as prices are rebounding from the underside of the rising Channel Bottom. 1.254 soft support has also been broken, and we could see 1.252 being tested. Whether price can break 1.252 and open up further bearish targets and invalidate current short-term bull trend remains to be seen. Stochastic readings are in favor of a slight rebound around the aforementioned support levels as stoch readings are already heavily Oversold, the lowest that we’ve seen since September 19th, the beginning of current short-term bullish momentum. Hence it will be highly presumptuous to assume that prices will be able to hit 1.25 and below right now especially when the overall bullish trend will still be intact as long as 1.252 holds, reverting initiative back to the bullish side.

Daily Chart
USD/SGD Daily" title="USD/SGD Daily" src="https://d1-invdn-com.akamaized.net/content/picb2e29e8d33ff5c5eddd75460f05b5e1c.PNG" height="324.9724137931" width="undefined">
Daily Chart is more bearish though, with prices pointing lower after 1.2575 held. However, the same 1.252 -1.257 consolidation continues to hold and we will need to see the same 1.252 level broken before a longer bearish correction towards 1.242 can be contemplated. Interestingly, stochastic readings remain bullish, with readings continuing to point higher. The potential bullish scenario also agrees with the outlook in the short-term analysis – if we break 1.257, we may see bullish acceleration towards 1.275 with 1.27 round figure as interim resistance. This would translate to price breaking back into the ascending channel, providing additional bullish impetus to send price potentially higher.

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