After facing rejection near the major resistance area yesterday, US Dollar/Singapore Dollar (USD/SGD) extended downside movement on Friday. The pair will however remain directionless as far as the price remains inside the rising wedge formation.
The pair is being traded around 1.2738 at 12:00 GMT in London. Resistance may be noted near 1.2790, the channel resistance. A break and daily closing above the channel could push USD/SGD into relatively stronger bullish trend opening doors for fresh multi-month highs.
On the downside, USD/SGD is likely to find support around 1.2730 that is the 61.8% fib level ahead of the 1.2700 handle which is the 50% fib level. The pair could ultimately test the channel support around 1.2637. A daily closing below the channel should ensure consistent downside movement below the 1.2600 handle.
On Monday, March24, Statistics Singapore will release the monthly inflation report. According to average forecast of different economists, inflation declined to 1.08% in February compared with 1.4% in the same duration of the previous year. Similarly, the inflation figure is expected to be 0.15% for the previous month compared with 1.00% in the month before. Generally, high inflation rate (close to 2%) is believed good for an economy. So if the actual outcome upbeats the expectations, then it will be bearish for USD/SGD and vice versa.
On Wednesday, March 26, Singapore Economic Development Board (SEDB) is scheduled to release the industrial production report for the month of February. According to the forecast of analysts, the industrial production remained 12.9% last month compared with 3.9% in the same month of the previous year. Likewise, the industrial production in Singapore jumped to 1.82% last month compared with 8.1% decline in the previous month.
On April 02, Singapore Institute of Purchasing & Materials Management (SIPMM) is due to release the Manufacturing Purchasing Managers Index (PMI) for March. Analysts have predicted a decline in the March manufacturing PMI to 50.77 points compared with 50.90 points in the previous month. A PMI reading above 50 points shows expansion in manufacturing activity while a reading below 50 indicates contraction.
Fed Monetary Policy
USD/SGD is likely to be backed by considerable buying pressure amid recent monetary policy from the Federal Reserve. The bank on March 19 announced reduction in the stimulus by $10 billion to $55 billion as the February nonfarm payrolls remained well above the projections. Moreover, Fed chief Janet Yellen indicated that the central bank might go against its forward guidance while making decision on the first rate hike. She said the policymakers might consider an increase in the cash rate within next six-month period. The remarks spurred huge buying in US Dollar (USD) and the same sentiment is expected to last throughout the next week.
USD/SGD is poised for a breakout through the rising wedge. Buying or selling on the breakout is always considered a safe strategy for exotic pairs; however beware of the false breakouts.
To contact the writer of this story: Usman Ahmed at firstname.lastname@example.org