USD/SGD – 1.27 Resistance Holding On

SGD weakened slightly today following the fall in Asian currencies this morning. However, prices continued to remain heavily offered by various multinational corporations，together with technical bears that are entering short as price traverse within the resistance band of 1.27 – 1.271. In terms of fundamentals, Q2 Unemployment Rate has been confirmed at 2.1%, higher than Q1 but remained unchanged from earlier estimates. Interestingly SGD actually strengthened from the news, with USD/SGD pushing from above 1.27 to 1.269 in the hour that followed. As a worsening unemployment rate should have been bearish for SGD, the lower movement by USD/SGD that followed suggest that fundamental influence currently is not the strongest, and technical influences may direct prices stronger for the rest of today.

Hourly Chart

With that in mind, the likelihood of 1.271 break may be slightly lower, especially since Stochastic readings are starting to peak and may give us a bearish signal soon. A bearish move from here will open up descending trendline as the ultimate bearish target, with 1.267-1.268 consolidation as interim support. If price does manage to break above the overhead resistance (possibly due to strengthening of USD from better than expected Retail Sales or U.Mich Sentiment), 1.28 will be the ultimate bullish target with 1.274 – 1.276 providing interim resistance.

Daily Chart

Daily Chart shows price staying within the Kumo, with current short-term rally looking to break the Senkou Span B parameter. Stochastic readings favor a bullish move with Stoch curve signalling a bullish cycle which has barely begun. If price indeed break away from current Kumo, 1.286 swing high will be the long-term target but it is possible for price to push for fresh 2013 highs on current bullish cycle by looking at the peak/trough of past cycles in 2013. That being said, should price failed to push above the Kumo, we will likely see a bearish Kumo break instead even if we maintain current levels. This would open up 1.26 as the 1st bearish target with previous swing low and Senkou Span level of 1.265 – 1.266 as interim support.

Fundamentally, USD/SGD will continue to remain more influenced by USD direction as there shouldn’t be any directional push from the SGD front. Monetary Authority of Singapore is not expected to change current SGD exchange rate curve and Singapore economic fundamentals generally play 2nd fiddle to technical/corporate flows when it comes to direction determination. With USD slated to increase further in the long run due to QE tapering (even if it doesn’t happen in September or 2013, it is bound to happen in 2014), USD/SGD direction appears to be up. However Indonesia Central Bank raised its key policy rate unexpectedly yesterday in a bid to defend the Rupiah, hence there remains a slight chance that MAS may wish to do the same in order to shore up the SGD. Even though SGD is a net exporting country, a strong SGD is still needed as a lot of necessities are imported from overseas, hence MAS will never allow SGD to depreciate indefinitely for fear of hyper-inflation. Therefore, do not take anything for granted, and traders should continue to keep a close eye as technicals reach a significant crossroad.

More Links:
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EUR/USD – Meanders around Key 1.33 Level

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