Singapore’s economy grew much more than expected despite a continued contraction in its manufacturing sector. Q4 GDP rose 3.3% (annualized) vs economist estimates of 1.7%. The latest quarter’s gains is not enough to compensate for last quarter’s shrinkage of 4.6%, but certainly will help soothe the sting.
SGD rallied, pulling USD/SGD back below 1.24 levels once more. Price managed to break above the resistance zone overnight due to weak US economic data, but the USD strength resulting from risk-off flows were no match to the persistence bears which brought USD/SGD back into the zone even before the SGD news was released. Nonetheless bulls should find solace that price has failed to break the 1.239 and also 1.238 support since the news. Stochastic readings are also heading into Oversold territory very soon, lending support to bulls.
Things have not changed drastically since we last discussed USD/SGD. The consolidation above 1.235 remains strong, though yesterday’s peak (if confirmed) could establish the “mulberry bush” consolidation area as a mini Head and Shoulders Pattern, with peaks on 1st Feb as the left shoulder, Feb 13 as Head, and current candle as right shoulder. The neckline is obviously 1.235, or a thicker neckline could be drawn if taking into consideration the 38.2% Fib. There is some credence in this interpretation with price seemingly rebuffed by the rising trendline since Mid Jan low. However Stochastic does not fully agree with the Stoch trough still not yet invalidated. That could easily change though, should price head lower towards 1.235, and we could see the Stoch/Signal cross lower.
Fundamentally, 2012 was a relatively good year in which Singapore’s economy grew by 1.3%, despite all the issues of shrinking manufacturing exports. 2013 started meekly, with the same manufacturing exports shrinking yet again. Despite these depressing signs, the official forecast for 2013 remain upbeat, with the Ministry of Trade reiterating its expectation of a 1-3% growth. Exports are expected to rise by 2-4%, though it is unclear on the USD/SGD rate MoT has based its forecasts on.
Should MoT base its calculations on current USD/SGD around 1.24, there is very little reason for Singapore’s Central Bank to intervene in 2013. Hence wordings such as “ease if necessary” that we have heard so often will be missing in MAS’s statements. However if MoT’s calculations requires a weaker USD/SGD perhaps in the 1.25 or higher region, then this would be the scope that MAS will need to ensure Singapore’s growth is not hampered by the growing strength of SGD.
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