USD/SGD – February Home Sales hit 14-Month Bottom

Home sales in Singapore fell 65% to reach a 14-month low after more cooling measures were introduced. This 7th round of measures include an increase in stamp duty by 5-7% points, and raising taxes for non-citizens holding properties. Loan limits are also reduced, with down payment in cash rising from 10% to 25%. Number of home units sold dropped to 708, versus 2,016 in January. The Government and Monetary Authority of Singapore will be glad that the cooling measures appear to have immediate impact, pulling prices down from record highs in Q4 2012.

Falling home prices is a good development, even though home ownership in Singapore is on the highest in the world, with 90.1% resident households owning their property in 2012 . If value of property dips, many Singaporeans stand to lose out especially as mortgage % for public housing remains high. Nonetheless, Government has chosen to bite the bullet as a runaway bubble may result in a larger fall and higher volatility when the bubble eventually burst. Therefore ultimately, a stable housing market would actually be beneficial in the long run, and provide strength to the SGD.

Hourly Chart

Price rallied yesterday after rumors of MAS changing policy circulated during early European hours, after RBNZ and SNB both expressed dovish intentions. Institutional traders pushed for longs above 1.25 after the initial breakout was established, though price fell back quickly just under 1.253 after better than expected US Jobless claims pushed price sharply lower.

Currently, price is supported by Kumo, but the new bearish forward Kumo twist formed just a few hours before will weigh heavily on price and potentially pushing price below the Kumo. Stochastic is bullish USD/SGD with readings pushing above the Oversold band, and adds strength to current Kumo.

Daily Chart

Daily Chart is still looking higher despite the strong pullback forming a gravestone Doji. Price may revert back to bearish bias if 1.245 support is breached, though a full bearish reversal may only be confirmed after 1.235 support has been broken, in which the Kumo would most likely have been breached by then and a new bearish Kumo twist may have appeared.

Fundamentally, USD/SGD appears to be negatively correlated to positive US news (and also positive global news looking at impact of Aussie employment data strengthening SGD). It seems that market is looking at USD as a safe haven currency right now, hence any positive news will push risk and exotic currencies higher e.g. AUD, NZD and SGD, THB etc.  The strengthening impact on USD has diminished greatly after Bernanke has affirmed market that QE3 dance will go on. Hence strong positive US news will only serve to enhance “risk on” sentiments rather than elevating USD as investor worry about QE 3 stopping due to US’s recovery.

More Links:
AUD/USD Technicals – Doji seen above 1.035
Dow Jones Industrials – Hitting Perfect 10

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