Overnight US Stock indices traded lower, pushing USD/SGD higher due to Risk Off sentiments which also saw USD/JPY traded lower. Early during today’s Asian trade, RBA’s negativity made matters worse and dropped AUD lower, bring other Asian currencies along for the ride. As a result, USD/SGD pierced above 1.24 for the first time this week, but the move was thwarted by the Chinese Government with their surprisingly low fix in USD/CNY, resulting in a sudden bout of strength for Asian currencies against the Greenback.
Hourly Chart
Reasons for such a strong Yuan fixing is unclear, as PBOC almost never reveal its intentions transparently. Analysts point at the tremendous positive Trade Balance data as possible reason for a stronger Yuan, while others believe that inflation may be creeping up on China. Regardless of the reason, at least for the purpose of USD/SGD, we should ask whether risk trends will reverse on the back of Chinese econs or will it still continue to stay in “aversion” gear?
Initial take is that we should not be too overly concern over the Chinese Trade Balance data as it is based on holiday month (Jan) which has the tendency to distort figures. Furthermore, fears of Chinese economic meltdown has been overly exaggerated, with the recent HSBC PMIs suggesting that China is doing fairly well. Despite so, Asian stocks are trading marginally higher, with US Futures doing the same. Hence if “risk-on” sentiment carries on, a scenario which USD/SGD back towards the rising trendline should not be ignored. This go together well with what Stochastic is telling us, with a recent top in place with reading under 80.0 after Stoch/Signal line crossing in the Overbought region.
Daily Chart
Longer term USD/SGD is still on the rise due to concern over Singapore’s economic health. Price is trading above the 1.233 ceiling and we are riding on the same bullish momentum that brought USD/SGD higher from Dec 18th to Jan 26th. From the broader perspective, 1.24 may not be as important as 1.243, as that was the previous swing high and the support back in Aug 2012. A break above 1.24 in the shorter term encourages price to push to 1.243, with potential bullish acceleration towards 1.255 if 1.243 is broken.
This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities.
Opinions are the authors — not necessarily OANDA’s, its officers or directors. OANDA’s Terms of Use and Privacy Policy apply. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.
Recommended Content
Editors’ Picks
EUR/USD edges lower toward 1.0700 post-US PCE
EUR/USD stays under modest bearish pressure but manages to hold above 1.0700 in the American session on Friday. The US Dollar (USD) gathers strength against its rivals after the stronger-than-forecast PCE inflation data, not allowing the pair to gain traction.
GBP/USD retreats to 1.2500 on renewed USD strength
GBP/USD lost its traction and turned negative on the day near 1.2500. Following the stronger-than-expected PCE inflation readings from the US, the USD stays resilient and makes it difficult for the pair to gather recovery momentum.
Gold struggles to hold above $2,350 following US inflation
Gold turned south and declined toward $2,340, erasing a large portion of its daily gains, as the USD benefited from PCE inflation data. The benchmark 10-year US yield, however, stays in negative territory and helps XAU/USD limit its losses.
Bitcoin Weekly Forecast: BTC’s next breakout could propel it to $80,000 Premium
Bitcoin’s recent price consolidation could be nearing its end as technical indicators and on-chain metrics suggest a potential upward breakout. However, this move would not be straightforward and could punish impatient investors.
Week ahead – Hawkish risk as Fed and NFP on tap, Eurozone data eyed too
Fed meets on Wednesday as US inflation stays elevated. Will Friday’s jobs report bring relief or more angst for the markets? Eurozone flash GDP and CPI numbers in focus for the Euro.