USD/SGD – Looking Bearish Despite Falling SG Exports

Singapore’s Non Oil Domestic Exports (NODX) continue to decline for the 7th straight month, shrinking 6.2% Y/Y for the month of August and much worse than previous month’s 1.9% decrease. Market was expecting a growth of 2.4%, hence it is understandable that SGD naturally weakened following the news.

Hourly Chart

Looking at price action, bulls must be thanking their luck as price was actually heading lower before the news announcement. Price wasn’t able to climb above the 1.263 soft resistance after the end of US session, much less confront the 1.264 swing high of the initial post Monday gap pullback. This bearish pressure is even more obvious when we compare other currency pairs such as AUD/USD, EUR/USD and GBP/USD. All these 3 currency pairs experienced significant pullback, with GBP/USD almost filling up the entire Monday gap. USD/SGD is far away from the 50% retracement mark, even after the weakening of SGD from the news event. Hence this suggest that USD/SGD is inherently bearish right now, and increases the likelihood of 1.265 resistance holding. Stochastic readings are also in favor of a bearish move, with a bearish cycle signal potentially forming soon.

Daily Chart

Daily chart shows the opposite picture, with 1.26 significant support holding up. Furthermore, price continues to trade ablve the descending Channel Bottom, and that opens up Channel Top as a viable bullish target within the next few trading days. Stochastic readings agree as well, with readings showing a fresh Bullish Cycle signal. That being said, Stoch bullish momentum has stalled, and is pointing back lower again, threatening to invalidate the bullish signal should the curve move below the 20.0 mark. Considering that we have yet to test 1.26 significantly as compared to the past 2 attempts back in July and August, there is a possibility of price continuing lower to test 1.26 once again – possibly in the next 2-3 days where the Channel Bottom will meet the 1.26 round figure.

With FOMC Tapering event looming, we have the perfect chance to test current market sentiment of USD/SGD. Should a tapering event occur, it is likely that USD/SGD will rally. Should the rally remain firmly below Channel Top even after a few days have lapsed, we can safely assert that bears are still strong and we could see a return of 1.26 and potentially beyond quickly. Similarly, should a Tapering announcement not be made, USD will weaken in the short-term, bringing us to 1.26. But should the confluence of Channel Bottom and 1.26 still hold, we can interpret that the overall bullish sentiment from early 2013 is still in play, which opens up the higher bullish target 1.285 as a plausible move.

With regards to SGD itself, it is unlikely that we are going to see huge volatility coming out in the next few months as Central Bank MAS is unlikely to shift its current NEER curve (policy rate) for SGD. As such, expected USD/SGD to experience stronger influences from USD direction and technical plays as well for the rest of 2013.

More Links:
GBP/USD – Takes Another Breather away from 1.5950
AUD/USD – Retreats from Resistance Level at 0.94
EUR/USD – Long Term Resistance Level at 1.34 Stands Tall

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