SGD has been seen trading lower recently especially since USD has weakened significantly due to a continued dovish Fed. Recent stock rallies also help to drive risk appetite higher, strengthening exotic currencies such as SGD against the Greenback. Beyond USD weakness stronger risk appetite, SGD has also garnered more strength in recent days. Last Friday’s Monetary of Singapore policy statement was a non-event, with MAS choosing not to alter the SGD trading band by any means. This allow SGD longer-term outlook to remain stronger, even though USD/SGD rallied higher on Friday due to an unexpected GDP contraction. Nonetheless, the combination of neutral/hawkish MAS and USD weakness help to push SGD lower, and price is currently trading further and further away from Mar’s 1.253 high.
Today’s release of record home sales units added further strength to SGD. USD/SGD dropped to just above 1.235 but rebounded quickly as well. Currently price has recovered from the lows only to find resistance in the form of 1.2375 and the overhead Kumo. The general bias is still down though, as price is clearly forming lower highs and lower lows, while forward Kumo is also bearish. Should price manage to break lower from current Kumo’s Senkou Span B, bearish acceleration may enter once again to send price towards 1.235 for test number 2.
Daily Chart is equally bearish, with price already broken below the rising Kumo and forward Kumo heading lower. The only support preventing bears from having free pass back towards 1.20 is the 1.235 line, barely keeping rally since Dec 2012 in play. Stochastic readings supports the bulls though, with readings heading higher, suggesting that price may be able to push higher from here to retest Feb’s consolidation ceiling and perhaps current Kumo bottom (Senkou Span B).
Fundamentally, SGD’s strength will be heavily dependent on the long-term outlook of Singapore’s economy that is not looking at its strongest now. With the threat of technical recession looming, it is hard to fathom why SGD can continue to strengthen. However, the Greenback is equally or if not weaker with recent data from US appearing weaker. Perhaps this week’s Fed Beige book may provide more insights into the state of US economic health. A stronger Beige book will drive USD stronger as likelihood of QE3 being halted will increase, driving USD/SGD higher while continued weakness will help USD/SGD bears to retest and hopefully break 1.235 to usher in a new bearish bias in the longer-term.
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