After reaching 1.272 yesterday, prices traded back within the rising Channel and went broke Channel Bottom as well, finding support around 1.268, staying above the Kumo below and forming a Stoch trough around the same period. Prices pushed higher in the afternoon (European morning) due to a fall in June Retail Sales, which shrank 6.9% M/M and 4.0% Y/Y. This looks bad initially, as historical June’s figures tend to be high due to the Great Singapore Sale that happens in the particular month, contributing to this seasonality effect. However, if we look beneath the headline, the main bulk of shrinkage actually came from motor vehicle sales, which fell 26.9% Y/Y. This decline is actually due to the tightening measures enacted by Central Bank MAS on loan caps, resulting in much lesser number of people buying cars as the initial cash outlay would be higher. Retails sales actually went up 2.6% excluding motor vehicles, not a spectacular number, but certainly not shabby either.
But it seems that USD/SGD bulls simply do not care. Prices pushed up higher and entered into the ascending Channel, but bears appears to be strong as well, rebuffing any advances and sending prices back down once more. Currently we are seeing a squeeze between Senkou Span A and Channel Bottom pushing price into the narrow space between the 2 technical zones. As overall bullish pressure still remains (as 1.268 is still holding rather nicely), even if price does not break back into the rising Channel, there is still a possibility of price straddling the trendline to push higher. Furthermore, Kumo does not continue to climb higher, but instead taper at 1.27 in the next few hours. As such, trading below Channel Bottom will not jeopardize the integrity of the Kumo. Instead, it is likely that Kumo may help to provide support around 1.27 and keep price above the key 1.27 round figure.
Fundamentally nothing much has change in terms of broad fundamentals. Retail Sales is not really a good indication of Singapore’s economic health as local demand is too small to be of any significance. Nonetheless, a strong retail sales figure would be able to indicate consumer confidence and the spending power/willingness of consumer to spend, and hence can be used as a proxy for the broader economy at large. Therefore, a 2.7% ex autos gain is kind of in line with what we’ve already expected, fairly similar to the Y/Y inflation numbers and GDP growth rate released recently. Hence, do not expect Central Bank MAS to do anything special just because of this, as everything is within expectations, with SGD most likely continuing on the same mild appreciative track that MAS has in mind.