Singapore’s Manufacturing activities rose in March, reversing the shrinkage back in February. The Manufacturing Index compiled by Singapore Institute of Purchasing and Materials Management (SIPMM) came in yesterday at 50.6, beating previous month’s 49.4. This increase is brought about by overall expansion in new orders, SIPMM said. Though the return to growth is definitely welcome amidst falling GDP and rising labor costs, weaknesses remain in the manufacturing sector. Sub-indexes for employment stayed below the 50.0 par level for the 2nd consecutive month, while a separate PMI focusing on electronic products dipped from 52.1 to 51.9. Also, comparing to the Global Manufacturing PMI compiled by JPMorgan, March’s growth is certainly nothing to behold compared to the global average of 51.2.
Compared to last year, the 1st 2 months industrial output has fell a tremendous 8.6%. Exports of electronics and pharmaceuticals – 2 of the largest components of Singapore’s manufacturing sector has declined greatly Y/Y. The technological advantage of Singapore industries has diminished significantly, if not eroded entirely with the emergence of South Korea and Taiwan’s high tech industries. This will continue to add pressure on Singapore’s economy and making growth rates lag even as global economy recovers.
All in all, the positive PMI news does not look as exhilarating after dissecting beyond the headline figure, and USD/SGD rebounded up higher during US trading hours yesterday. Even though USD/SGD is still within a downtrend, the failure of SGD bulls to carve out a new USD/SGD low or at the very least test 2nd Apr’s low underlines the lackluster response from the SGD bulls. Price has since found resistance in the form of overhead Kumo, with current price levels re-testing the Senkou Span A (Kumo bottom) after a slight push early Asian trade today.
From a technical viewpoint, the bearish Kumo twist and Stochastic readings suggest that current re-test Kumo may find it hard to penetrate higher. Even if price manage to break higher, resistance zone between 1.239 – 1.24 may push price lower once more, with only a break of 1.24 and preferably 1.242 sufficient to rekindle bullish momentum.
Daily chart agrees with this viewpoint, with price breaking lower and testing the bottom of current Kumo. The Senkou Span B has managed to rebuff the 1st attempt, but price may eventually break the Kumo by default due to the rising Senkou Span level. Kumo twist found in the forward Kumo also favor downside scenarios. Nonetheless, traders may wish to wait for further bearish confirmation due to what Stochastic is telling us. Readings are firmly in the Oversold region, with 1.235 support from Feb consolidation not yet tested. A break of 1.235 may trigger acceleration to the downside, but without which, the uptrend from Dec lows appears to be intact, which would render current sell-off from Mar high as merely a retracement.
With MAS semi-annual policy meeting coming in late Apr, and preliminary Q1 GDP data awaiting, we could see price trading within Feb’s consolidation as speculative action of SGD diminishes. However, as liquidity in SGD is thinner compared to USD counterpart, traders should take notice of any USD movement (via USD/JPY and EUR/USD as non exhaustive examples) as that may help bears to break current deadlock if weakness in USD is seen.
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