USD/SGD Technicals – Stochastics aligned on Long and Short-term charts

SGD enjoyed a reasonably good week – brushing off weakness due to Cyprus uncertainty and the weakening exports. Singapore exports fell, coming in at -2.4% m/m vs an expected +4.5%. Y/Y data was shockingly bad, -30.6% compared to the same time in 2012, much worse than the 17.7% expected contraction. USD/SGD hit above 1.252 early Monday morning after the news, but price fell back quickly due with real money flow pushing price down.

Hourly Chart

The push lower failed to cover the gap, and that is a strong indication of inherent bullishness. Indeed price managed to rally of Tuesday’s low significantly, though resistances are also clear for all to see. Monday’s swing high managed to cap bullish pressure temporarily, though it was broken eventually, Swing high on 14th Mar took over and push price back to the 1.2506 level. Currently, the newly formed Channel is providing guidance as price is hitting Channel Top which is the confluence with the 1.2506 level. Stochastic reading is peaking in Overbought region which lends weight to a downside scenario from here, and inline with the broader short-term sideways trend we’re seeing.

Daily Chart

Daily chart is clearly undergoing an uptrend right now. Price has been straddling along Channel top while Stoch readings have been consistently above 80.0 levels. Current Stoch readings is the first time price has breached below 80.0 and could signal the onset of a bear cycle. This is in-line with what Hourly Chart stochastic is telling us.

Weakening Singapore economic fundamentals will continue to pull SGD weaker. Even though the Singapore Central Bank refuse to weaken SGD to boost exports thus far, traders are focusing more on long-term health of Singapore, which make sense considering part of SGD current strength is due to the AAA ratings and strong GDP figures during the global crisis. With housing prices looking to peak due to MAS regulations, it is likely that foreign interest in Singapore based assets will fall, and that will weaken SGD further. This would also mean that should MAS choose to adjust the SGD trading band in the upcoming meeting in April, USD/SGD may not actually rally but dip due to perceived better long-term outlook – in line with the technicals. Risk trends may also play a part, though looking at how USD/SGD volatility (or lack thereof) while the Cyprus negotiations are underway, it remains to be seen if USD strength due to safe haven flow can result in USD/SGD flying higher.

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