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USD/SGD: Time For a Sing Dollar Reversal?

USD/SGD: Time For a Sing Dollar Reversal?

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The USD/SGD rally has run aground at the 1.4100 big figure, which could be the start of a turnaround for the Singapore dollar.

US dollar strength drove the Sing dollar to a two-year low of 1.4100 on Wednesday, extending the three-week depreciation to 3.23%.

The USD posted gains against most trading pairs, with the US dollar Index reaching the highest level in two decades. The greenback’s push follows the better-than-expected ISM Non-Manufacturing PMI on Wednesday, which almost guarantees a 75 basis-point hike at the next FOMC.

The manufacturing data and the robust employment numbers of late suggest the US economy can withstand tighter financial conditions.

On Thursday, Fed Chair Jerome Powell told the markets to expect further policy adjustments until the Fed meets its inflation targets. Subsequently, traders expect the US dollar to remain firm.

The economic slowdown in major trading partner China is weighing on Singapore’s economy. Because of this, we expect manufacturing data to be week in the coming months. Typically, central banks devalue the currency to stimulate exports. However, the Monetary Authority of Singapore (MAS) faces a more pressing issue. Inflation is currently entrenched above 4.00%. For that reason, the MAS will likely raise rates at the next policy meeting.

Considering USD/SGD has priced in a 75 bp hike at the next Fed meeting, the Singapore dollar should catch a bid if the MAS follows suit.

US Dollar to Sing Dollar Forecast

The daily price chart shows a bearish double-top pattern has formed at 1.4100. Notably, a double-bottom at 1.3670 kickstarted the 3.30% rally starting August 19. With this in mind, technical traders may initiate short USD/SGD positions here.

If the resistance at 1.4100 holds, the August 25 low at 1.3880 (50% retracement) is a logical target. However, the Chinese Consumer Price Index (CPI) data later today, will shed light on China’s economy. If the data is read as negative, it could spillover into USD/SGD. Taking this into account, an extension above the resistance at 1.4100 negates the bearish view.

Check out the cheapest way to send money to Singapore.

USD/SGD Price Chart

Elliot Laybourne
Elliott is a former investment banker with a 20 year career in the city of London. During this time he held senior roles at ABN Amro, Societe Generale, Marex Financial and Natixis bank, specialising in commodity derivatives and options market-making. During this time, Elliott’s client list included Goldman Sachs, JP Morgan, Credit Suisse, Schroders Asset Management, and the Pennsylvania State Public School Employees Retirement System, amongst others. Today, he splits his time between Thailand and Dubai, from where he provides trading consultancy and business development services for family office and brokerage clientele.