USD/SGD Technicals – Cyprus Deal spur short-term sellers

SGD strengthened Monday morning on Cyprus’s new Troika agreement over the weekend. The new deal will protect depositors below 100,000 EUR and is a much preferred option as it took the burden of saving the economy away from your average Joe from the street. Market agrees and risk correlated assets pushed higher, weakening the Greenback and enhancing strength of exotic currencies such as SGD.

Hourly Chart

The morning gap lower pushed USD/SGD below the downward trending channel. Price has also traded below the swing low of 19th Mar, and more importantly, fill up and trade below the gap that was formed on 16th Mar which was when the original Cyprus deal was announced. Price was looking bearish ever since Mar 20th decline, though the aforementioned technical features were expected to provide avenue for bulls to test Channel Top once again, or at the very least provide some semblance of support – e.g. price straddling on the Channel Bottom trading marginally lower. This bearish breakout underlines the strong bearish momentum that we’re currently facing.

Logically, one may think that the fall in USD/SGD may be led by USD weakness more so that SGD’s strength. However, looking across different majors, it seems that USD strength does not appear to be gaining grounds equally across all majors – placing a huge dent to the hypothesis. The alternative, which suggest that SGD is strengthening, has some justification as recent survey done by the Monetary Authority of Singapore showed that economists and analysts are optimistic about Singapore 2013 prospect – despite a sharp fall in exports recently. Manufacturing sector is expected to grow 3.3%, higher than previous forecast of 3.0%, while service sector (financials) is expected to be close at 3.0%, rising from the previous 2.5%. Hence it is not surprising that corporations have been spotted selling USD/SGD above 1.25 last week as the private sector firmly believes in the long-term growth in Singapore, which will almost certainly push USD/SGD lower in the future.

Daily Chart

From a technical perspective, the uptrend since Dec lows remain intact, and the channel remains in play. The break of 1.246 (seen clearer on the hourly chart above) only serve to point price towards channel bottom, which may provide support. Bottom channel looks poised to over take the swing high found during Mid Feb and that will enhance the strength of support. Similarly, should price remain above 1.246 when hitting Channel Bottom, the likelihood of a rebound increases.

Nonetheless, current bearish pressure remains as reflected by Stochastic readings. Should price test Channel bottom from this sell-off, it is likely that Stochastic readings will not be in the Oversold region, which would help bears to break the Channel altogether. In the event of which, further support can be found around 1.24 and 1.235, with a break below 1.235 potentially reversing the bullish bias that has been driving USD/SGD higher in 2013. MAS may still play a big role in USD/SGD direction with the April meeting looming. Likelihood of MAS holding current SGD trading band remains high, but traders may use the reaction post announcement to determine the underlying sentiment which will help to identify longer-term direction.

More Links:
AUD/USD – Consolidating Well Around 1.0450
EUR/USD – Placing Pressure on the Key 1.30 Level
GBP/USD – Moves to Four Week High Around 1.5250

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.