- Summary:
- USD/SGD made a harsh reversal as the US dollar index (DXY) plunged. It dropped from a high of 1.4493 in November to a low of 1.3438
The USD/SGD made a harsh reversal in November as the US dollar index (DXY) plunged. It dropped from a high of 1.4493 in November to a low of 1.3438 on December 5. The pair has crawled back to about 1.3600 this week.
Strong US economic data
The USD/SGD price has been in a steep sell-off in the past few weeks as investors focus on the strength of the Singapore economy. Singapore has benefited from the ongoing business exit from China as the country implements strict Covid-19 rules. It has also taken advantage of woes in Hong Kong to attract many large businesses in the financial sector.
In a report, the Ministry of Finance said that the economy would expand by 3.5% in 2022 and then moderate in 2023 because of external factors. Its economy expanded by 4.1% in the third quarter, which was slightly lower than the government’s estimate of 4.4%. Now, the government expects that Singapore’s economy will grow by between 0.5% to 2.5% next year.
The USD/SGD pulled back slightly this week after Singapore published strong retail sales numbers. Sales rose by just 0.1% in October after expanding by 3.2% in September. This growth translate to a year-on-year increase of 10.4%.
The main reason for the recent recovery is the strong economic data from the US. According to the Labor Department, the economy added over 283k jobs in November while the unemployment rate remained at 3.7%. Therefore, analysts expect that the Federal Reserve will hike interest rate by 0.50% next week. It will then deliver smaller hikes in 2023.
USD/SGD forecast
The daily chart shows that the USD to SGD exchange rate has been in a strong bearish trend in the past few weeks. As it crashed, it managed to move below the ascending trendline shown in black. Most importantly, the pair is about to confirm a death cross, which happens when the 200-day and 50-day moving averages make a crossover. The Relative Strength Index (RSI) has continued dropping.
Therefore, the pair will likely continue falling as sellers target the key support level at 1.3350. The stop-loss for this trade will be at 1.3660.
