USD/SGD started the week higher, with a gap towards 1.24 when market opened due to spillover from USD/JPY rally. However the rally is not sustainable with price traded lower after touching 1.24. On the other hand, USD/JPY managed to maintain its gap, underlining USD/SGD’s inherent bearishness.
Price has failed to achieve 2 important milestone on the rally – breaking the current Kumo higher, and forming a bullish Kumo Twist. Also, sell-off in the past 1 hour broke the Kijuu-Sen (red line) that has been providing significant support/resistance for the past few trading days. Stochastic is also forming a new peak on this morning selling action. Distance between Stoch and Signal line remain constant, suggesting that the bearish momentum is still ongoing, and a slowdown is not currently in sight.
Daily Chart appears to be mildly bullish, with support of price coming in the form of the rising trendline. A test of 1.24 is possible once more if price manage to bounce from the trendline. Failing which, 1.235 may provide further support against a fall back towards 1.22 – 1.23 region. Stochastic is being undecided right now, with both Stoch and Signal lines stuck together for an extended period of time. This could also mean that price is trading sideways, which would weigh more eventually should 1.24 continue to fail to establish itself.
Fundamentally, it is hard to see SGD strengthening itself by its own. Even though last week’s GDP figure was much better than expected, Singapore’s manufacturing under belly is showing itself recently. Exports of electronics and pharmaceutical products have fallen by 1/5ths despite Singapore’s economy operating at full capacity, which was mentioned by Finance Minister Tharman in the latest 2013 Budget statement. This is disconcerting as it suggest that changes must be made structurally to Singapore’s industries to bring the soft economy back to health, and is certainly not something that can be resolved using monetary easing measures. Ultimately, if Singapore fails to reinvent itself, the long-term outlook will be bleak which will weaken the SGD.
That being said, traders may simply focus on the shorter-term implication – Monetary Authority of Singapore not easing – which will mean a stronger SGD and enhance the bearish outlook of USD/SGD in the near-term. Ben Bernanke will explain more about QE Infinity on Tuesday morning (EST) which may implicate USD strength. As such, we are bound to see volatility in USD/SGD and bulls should be worried if the volatility fails to break 1.24.
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