USD/SGD – Sing Under Pressure, US Nonfarm Payrolls Next

USD/SGD has posted modest gains on Friday, as the pair trades at the 1.4380 in the European session. On the release front, Singapore Foreign Currency Reserves were slightly higher than expectations. Over in the US, the markets are anxiously awaiting the Nonfarm Payrolls report, one of the most important economic indicators. The estimate stands at 203 thousand.

The Singapore dollar has started the New Year on a sour note, losing about 200 points this week. USD/SGD is trading close to 3-month highs, as the US dollar has hammered minor currencies such as the Singapore, Australian and New Zealand dollars. Why are investors scurrying to the safe-haven US dollar? The trend began early in the week, precipitated by disappointing Chinese manufacturing data which highlighted weak demand from the world’s number two economy. Market jitters intensified as tensions rose between Iran and Saudi Arabia and a nuclear device test by North Korea. Adding fuel to the fire, China has devalued the yuan by over 0.5%, triggering another bout of risk-aversion by investors. Singapore is an export-dependent economy, and the ongoing Chinese slowdown and a weaker yuan could be bad news for the island-state and push the Singapore dollar to lower levels.

US employment numbers are the main attraction on Friday, with the release of Nonfarm Payrolls and the Unemployment Rate. An unexpected NFP reading could have a sharp impact on the direction of AUD/USD, so we could see some volatility in the North American session. Earlier in the week, ADP Nonfarm Payrolls surged to 257 thousand in December. This crushed the forecast of 193 thousand, and was the strongest gain since June 2014. This week’s employment readings will be carefully monitored by the Federal Reserve, and strong numbers will increase speculation about another rate hike early in 2016.

The Federal Reserve released the minutes of its historic December policy meeting, at which it raised rates by 0.25 percent. The minutes were noteworthy in highlighting differences among policymakers as to whether US inflation levels will improve. Indeed, some FOMC members said that their vote in favor of a rate hike was a close call because of concerns that low inflation levels will continue in 2016. What’s next? The Fed has hinted that the December rate is the first of a series of incremental moves in 2016, but inflation levels will play an important role in the timing and size of future rate hikes.

USD/SGD Fundamentals

Thursday (Jan. 7)

• 4:00 Singapore Foreign Currency Reserves. Estimate 247.7B Actual 247.1B

Friday (Jan. 8)

• 8:30 US Average Hourly Earnings. Estimate 0.2%

• 8:30 US Nonfarm Employment Change. Estimate 203K

• 8:30 US Unemployment Rate. Estimate 5.0%

• USD/SGD was flat in the Asian session, and has posted marginal gains in European trade.

• 1.4368 is a weak support line

• 1.4459 is an immediate resistance line

• Current range: 1.4368 to 1.4459

Further levels in both directions:

• Below: 1.4368, 1.4248, 1.4139 and 1.4073

• Above: 1.4459, 1.4530 and 1.4682