Home USD/SGD Slides to Major Support
USD/SGD Slides to Major Support

USD/SGD Slides to Major Support

  • Published: 11th August 2022, 08:53

USD/SGD slumped after Wednesday’s US inflation data, extending the Singapore dollar’s recent gains against the greenback to 3 percent.

The Singapore dollar strengthened by 0.7 percent to 1.3678 on US dollar weakness after the Consumer Price Index (CPI) surprised on the downside.

July’s headline CPI came in at +8.5 percent year on year, and unchanged from June. The yearly and monthly figures were both below the analysts’ median estimates which projected an 8.7 percent and 0.2 percent gain, respectively.

A risk-on mood set the tone for the day. All major US indices posted substantial gains, whilst the US dollar index fell over 1 percent. Furthermore, Treasury Bond yields retreated as odds of a 75-basis-point rate hake at the next FOMC meeting dropped.

The US dollar has lost ground recently, following an incredible run of form in 2022. The US dollar Index reached a two-decade high of 109.29 in July on a combination of safe-haven and carry-trade buying. Although, some wind has come of the dollar’s sails since. As a result the Singapore dollar has clawed its way back from a 6.5 percent year-to-date deficit to a 3.5 percent loss at the time of writing.

Central Bank Support

The Monetary Authority of Singapore (MAS) must take some credit for the Singapore dollar’s strength. In a televised message on August 8 Singapore’s Prime Minister Lee Hsien Loom told the nation the MAS is prepared to increase support measures to bring down inflation.

The MAS has been quick to respond to the threat of rising inflation. In July, the central bank surprised the market with an inter-meeting 75-basis-point interest rate hike. As well as the aggressive policy adjustment, the MAS told reporters, “This policy move, building on previous tightening moves, should help slow the momentum of inflation and ensure medium-term price stability,”

The central bank’s backing is critical for the currency’s recovery. By vowing to keep inflation under control, the Singapore dollar is expected top rise, encouraging individuals to send money to Singapore to take advantage of the currency’s strength.

US Dollar to Singapore Dollar Outlook

The daily price chart reveals USD/SGD is losing ground fast. As a result of yesterday’s dramatic sell-off, the rate fell below the 100-Day Moving Average (DMA) at 1.3804 (blue line). However, the support provided by the 200-DMA around 1.3680 has so far slowed the decline.

The Relative Strength Index (RSI) is another supportive factor. The momentum indicator is at 36, and approaching oversold territory. With that in mind, the present level of USD/SGD may encourage speculative buying.

If the pair remains above the 200-day moving average, the 100-day moving average at 1.3804 is an obvious target for the bulls. By contrast, a daily close below the 200-DMA, may encourage further selling, bringing the 1.3500 level into focus.

USD/SGD Exchange Rate Chart

USD/SGD
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.