USD/SGD Has Plummeted for Six Straight Days. Buy the Dip?

Summary:
• The USD/SGD price has retreated to the lowest point since July 1st as the dollar sell-off accelerates. What next for the USD to SGD?

As the dollar sell-off accelerates, the USD/SGD price has retreated to the lowest point since July 1st. The USD to SGD exchange rate has fallen to a low of 1.3900, which is about 1.35% below the highest level this month. It remains 3.65% above the lowest level this year.

US dollar index weakness

The USD/SGD price has pulled back as investors react to the relatively weak US dollar. After surging to $109.34 last week, the closely watched US dollar index (DXY) has pulled back to about $106. This happened as investors changed their forecast about the upcoming Fed decision. Many analysts now believe that the Fed will hike by 0.75% instead of the previous estimate of 100 basis points.

Data published on Tuesday showed that the country’s housing market is weakening. Building permits and housing started declining sharply in June of this year. A day earlier, numbers revealed that the sentiment among homebuilders crashed to the lowest level on record. Therefore, while inflation remains at elevated levels, there is a likelihood that the bank will not hike by 1%.

The USD/SGD has also dropped in the past six straight weeks after the Monetary Authority of Singapore (MAS) decided to tighten it last week. The second off-cycle tightening allowed the local currency to appreciate by re-centring the midpoint of the policy band to its prevailing level. The bank’s statement said:

This policy move, building on previous tightening moves, should help slow the momentum of inflation and ensure medium-term price stability.”

USD/SGD forecast

The daily chart shows that the USD to SGD exchange rate crashed in the past six days. This is the first time it has done that since September 2021. In addition, the pair has managed to move below the 25-day moving average while the Relative Strength Index (RSI) has moved below the overbought level.

The pair remains slightly above the ascending trendline shown in red. Therefore, the pair will likely keep falling as traders target the trendline at about 1.3850. A move above the resistance at 1.400 will invalidate the bearish outlook.