Singapore Q2 GDP grew at an annualized and seasonally adjusted 15.2% Q/Q, the highest in 2 years and blew away that early 2013 fears of a technical recession. This seasonally adjusted 15.2% growth is almost twice as much as the expected 8.3% annualized growth estimated by analysts. On a year on year basis Q2 GDP rose 3.7%, similarly blowing analyst estimates of 2.0% out of the water. This stupendous growth is attributable to the strong gain in the Manufacturing Sector, which grew 37.6%, more than turning around from the previous quarter’s 12.7% decline. Services and Construction sectors grew at a respectable 9.0%.
However, USD/SGD remained relatively mute following the announcement. Price went as low as 1.25798 following the news release, a mere .1 pip lower than the previous swing low forged during the end of yesterday’s US session. From then on, USD/SGD actually traded higher, and not lower – which implies that SGD is actually weakening post the strong GDP print, which is highly peculiar to say the least. It appears that local analysts do not really believe that the numbers may be truly reflective of the health of Singapore economy, as this is merely an advance estimate, and analysts actually believe that later estimates may actually see the Ministry of Trade and Industry revising the figures lower. Furthermore, with China continuing to look weak, and Singapore’s own June PMI much weaker as compared to the GDP headline figure, analysts believe that the seasonally adjusted 15.2%, even if accurate, may be overly optimistic.
Furthermore, USD/SGD has collapsed heavily not due to strength in SGD but rather on the weakness of USD due to surprisingly dovish Bernanke’s speech following the equally dovish FOMC minutes. As such, the rally that we’ve seen today which sent price back up 1.26 but under 1.265 can be interpreted as a technical pullback which draws price back within the consolidation zone of 11th Jul.
From a technical perspective, USD/SGD has 3 parallel trendlines that characterized the decline from the start of the week. Currently price is facing resistance from the middle trendline (not to be confused as the mid point between the 2 other lines), with Stochastic readings entering overbought region. With this in mind, it is difficult to imagine USD/SGD able to break the top trendline. Middle trendline is still possible considering that current bullish momentum is not over as Stoch readings have yet to turn around. If stoch reading starts to turn and/or bearish Candlestick reversal pattern emerges below the descending trendline, the lower trendline will emerge as a possible target, with price most likely able to break 1.26 and perhaps even 1.258 for stronger bearish acceleration considering that the trendline is already hovering around 1.258 now.
Weekly Chart shows the failure of price to stay beyond the 161.8% Fib extension. Price is also trading below the 1.265 support found back in May/Jun 2012, and is currently within the consolidation range back in Feb – April 2012. With Stochastic readings looking likely to form a bear cycle signal soon, we could be seeing stronger bearish correction if stochastic reading is correct.
Considering that Singapore Central Bank MAS is entirely comfortable with SGD appreciating in 2013, there should not be any fundamental reason against a bearish USD/SGD from here unless USD start to strengthen significantly again. Continue to watch the correlation between USD and the US stock indexes for indications where USD may move in 2H 2013.