Singapore Dollar: Upside risk capped by 1.2790 against US Dollar – UOB

United Overseas Bank’s (UOB) Quek Ser Leang and Lee Sue Ann note USD/SGD has firmed modestly, with the pair closing at 1.2835 after testing both 1.2800 and 1.2840. Short-term momentum now favors a mild upside, though strong resistance at 1.2850 is expected to cap gains. On a 1–3 week horizon, they still see downside risk, but stress that a clear break below 1.2790 is needed to signal further weakness.

Mild upside while downside risk lingers

"24-HOUR VIEW: Following Wednesday’s price action, we noted yesterday that “the underlying tone has softened somewhat.” We indicated that USD “could edge lower,” but we pointed out that “given the lackluster downward momentum, any decline is unlikely to reach 1.2790.” The subsequent price movements did not unfold as expected. USD dipped to 1.2800 and then rose to 1.2840 before closing 0.16% higher at 1.2835. Upward momentum has increased, albeit not significantly. Today, USD could edge higher but based on the current momentum, any advance is unlikely to break the strong resistance at 1.2850. On the downside, a break below 1.2820 would indicate that current upward pressure has eased."

"1-3 WEEKS VIEW: We have held the same view since Monday (03 Aug, spot at 1.2815), when we highlighted that while the recent strong momentum “suggests further downside risk, USD must break and hold below the significant support at 1.2790 before further declines are likely.” Although USD subsequently tested 1.2790, it has not been able to make further headway on the downside. We will maintain our view as long as 1.2850 (no change in ‘strong resistance’ level) is not breached, but the likelihood of USD breaking clearly below 1.2790 has diminished."

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