USD/SGD – Higher Inflation but Slower Housing Growth

Singapore’s July Consumer Price Index gained +1.9% Y/Y , 15 bps lower than analysts consensus estimate.  Core Inflation was worse, coming in at only 1.6% Y/Y compared to expectations of 1.8% according to a poll conducted by Reuters. However, if you think this means that inflation pressure has weakened, you would be mistaken. In fact, this is the 3rd consecutive month Y/Y inflation has increased, suggesting that Singapore is facing higher, not lower inflation risks. Main drivers for the growing inflation appears to be higher car prices, contributed by the rise in Certificate of Entitlement (COE) for vehicles, which pushed Private Road Transport cost by 2.0% higher. Food prices also rose by 2.1%, stronger than previous month’s 2.0% due to higher cost of non-cooked food items.

Not all is gloom and doom though, as Housing Costs are growing at a slower pace compared to before, rising by 2.6% in July versus June’s 4.6%. However, a huge contributing factor could be the Service & Conservancy Charges rebates given to public housing occupants – a one time subsidy that helped buffer the gain in housing prices. Nonetheless, a lower growth rate in housing cost means that Central Bank MAS can relax for a while more. What is more disconcerting is the fact that food prices are gaining slowly but surely. As Singapore rely heavily on imports to feed her residents, MAS will need to ensure that SGD does not weaken to such an extent that would increase food costs even further. But even in this regard, MAS is not immediately threatened. Even though USD/SGD has been moving higher, the Sing Dollar is actually strengthening against Malaysian Ringgit and Indonesia Rupiah, the 2 countries whom Singapore import the most food from. All in all, July’s numbers are kind of neutral in a nutshell.

Hourly Chart


SGD actually weakened when the numbers were released as traders choose to focus on the headline miss, pushing USD/SGD higher. The rally could also be technically influenced though, with price rebounding from the Channel Bottom and confluence with the rising trendline. A good support for this assertion would be the fact that price is seemingly facing resistance from Channel Top in the following hour. Moving forward though, we could still see further bullish attempts towards Channel Top as current candle does not constitute a proper test of the resistance line. Furthermore, Stochastic readings suggest that we could be within a bullish cycle currently. Considering that current weekly rally is still in play, if we continue to stay above 1.28, there is a realistic chance of price eventually breaking Channel Top today for a move towards 1.286 and potentially higher next week.

Daily Chart


Daily Chart suggest that even if 1.28 is broken, another support around 1.277 will continue to keep prices afloat. Even if prices breach the aforementioned level, 1.27 round figure will help to push price back up. This is typical of uptrends, where supports are in abundance compared to resistances. Speaking of which, 1.286 is the level to beat should we continue to move higher, with potential bullish acceleration when 1.286 is broken, moving quickly towards 1.30.

More Links:
USD/CAD – Canadian Dollar Drops As Retail Sales Falter
GBP/USD – Pound Loses Ground After Fed Minutes Release
AUD/USD – Aussie Struggling Close to 0.90 Level

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Mingze Wu

Mingze Wu

Currency Analyst at Market Pulse
Based in Singapore, Mingze Wu focuses on trading strategies and technical and fundamental analysis of major currency pairs. He has extensive trading experience across different asset classes and is well-versed in global market fundamentals. In addition to contributing articles to MarketPulseFX, Mingze centers on forex and macro-economic trends impacting the Asia Pacific region.
Mingze Wu