After clearing the 1.26 and rising trendline confluence, USD/SGD continued moving higher strongly towards 1.27. Price was understandably higher as Bernanke remained highly dovish during his testimony to Congress, stating that cutting QE now would be dangerous and may bring the economy back down where it was before. US Stocks rallied after his speech, with S&P 500 trading above 1,685 and DJI above 15,500. This brought USD higher and allowed bulls to advance the breakout further.
However, the gains in USD did not last long, with stock prices unable to hold onto their gains no thanks to the subsequent FOMC meeting minutes which reflected disunity amongst the Fed voting members. This put a huge dent on Bernanke’s assertions as he holds merely one vote and the disunited Fed may be able to veto him out if they wish, pushing stocks and USD lower. But looking at USD/SGD, one would not be able to have a hint that USD is weakening. This suggest that USD/SGD may be running on its own technical impetus for now, which implies that this bullish breakout has legs to run higher.
Today’s early Asian session affirms this view, with a strong GDP showing failing to dampen current breakout. Singapore GDP expanded 1.8% Q/Q in the Q1 2013, versus a 1.1% Q/Q analysts forecast consensus and much better versus the original advance estimates that pointed to a 1.4% shrinkage. Conventional wisdom would say that SGD should strengthen on the back of this, and the failure to do so underlines the strong technical impetus that is driving USD/SGD right now.
Given such overall bullishness, if USD and US Stock gets back on the northbound track, we can easily see USD/SGD gunning for even higher highs. However, this also means that USD/SGD is not entirely running on fundamentals but rather on pure bullish sentiments. Should USD continue to slide lower, it will not be surprising to see price giving up all the gains easily and pull lower in a short time. Hence traders will need to decide whether to partake in this strong bullish uptrend which is bulldozing its way higher with such strong risks lingering.