SGD received a slight boost today – Industrial Production for May grew 2.1% Y/Y and 1.2% M/M, vs a poll conducted by Reuters in which analysts shared a consensus 0.3% and -0.5% growth estimate respectively. The surprise gain was attributed to the increase in Pharmaceuticals products which grew 25.2% Y/Y. Growth in Electronics was more modest but nonetheless healthy, coming in at +4.3%. Not all is rosy though, with Off-shore and Marine engineering, 3rd largest industrial sector in Singapore shrinking 11.9%. Nonetheless, it should be said that Industrial Production for May is strong, with 3 months moving average figure (ex Biomedical) finally turning positive. Despite this strong print, SGD did not rally significantly, but meekly nudged USD/SGD lower with current price still slightly higher above 1.271 support that has been in play post Bernanke’s announcement.
This lack luster reaction is not unexpected, as SGD was not expected to move strongly even when the economic situation improves/worsens unless the difference is indeed extreme. This is due to stability of Central Bank of Singapore, who is unlikely to make changes to current monetary policies. As a result of which, only a strong enough shift in leading indicator data that can potentially derail current economic growth/inflation rate trajectory within MAS comfort zone can result in larger reaction in SGD.
From a technical perspective, price is currently sitting in a precarious position between bullish and bearish direction. After breaking below 1.27 yesterday and threatening to unravel the gains post Tapering talks, price recovered and broke both descending trendline and the 1.271 support turned resistance within the same hour. This suggest that short-term bullishness is formidable, and the bullish break would have opened up 1.275-1.276 consolidation ceiling if not for the nudge lower which impaired USD/SGD’s ability to test the 1.2735 support turned resistance. Failing to break 1.2735 will weigh price down and threaten to revert price back to current week’s decline. Stochastic readings are favorable towards downside currently, with readings peeking below 80.0, however price should preferably break 1.271 and back below the descending trendline for a stronger bearish signal, which will most likely result in a stronger bearish cycle signal from Stochastic. That being said, should price manage to clear 1.2735, it is possible that Stochastic readings will be able to push higher considering that current readings are not as Overbought as compared to before (see post FOMC meeting reading). This suggest that a move back towards 1.2735 is still plausible, but makes a break of 1.275 – 1.276 ceiling harder without some sort of corrective response.
Weekly Chart is more bearish, with price currently trading below the 161.8% Fib extension of the original rally back in 2013. This 161.8% extension is the confluence with 1.2735, which implies that should short-term price does manage to trade higher, we would be on track for a bullish extension for 2H 2013. Long-term target for bulls would be between 1.29 – 1.31, where there are a series of peaks and the 261.8% Fib providing resistances. Stochastic readings are likely to hit the Overbought region when price reaches the target levels, which increases the likelihood of a technical pullback if not a full bearish reversal. However if price holds below 161.8%, the 100% level remains vulnerable, and may perhaps even seek out the slightly stronger 38.2% Fib retracement if bearish momentum is strong enough.
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