Mingze Wu | Sep 13, 2013 05:50AM ET
SGD weakened slightly today following the fall in Asian currencies this morning. However, prices continued to remain heavily offered by various multinational corporations,together with technical bears that are entering short as price traverse within the resistance band of 1.27 – 1.271. In terms of fundamentals, Q2 Unemployment Rate has been confirmed at 2.1%, higher than Q1 but remained unchanged from earlier estimates. Interestingly SGD actually strengthened from the news, with USD/SGD pushing from above 1.27 to 1.269 in the hour that followed. As a worsening unemployment rate should have been bearish for SGD, the lower movement by USD/SGD that followed suggest that fundamental influence currently is not the strongest, and technical influences may direct prices stronger for the rest of today.
Fundamentally, USD/SGD will continue to remain more influenced by USD direction as there shouldn’t be any directional push from the SGD front. Monetary Authority of Singapore is not expected to change current SGD exchange rate curve and Singapore economic fundamentals generally play 2nd fiddle to technical/corporate flows when it comes to direction determination. With USD slated to increase further in the long run due to QE tapering (even if it doesn’t happen in September or 2013, it is bound to happen in 2014), USD/SGD direction appears to be up. However Indonesia Central Bank raised its key policy rate unexpectedly yesterday in a bid to defend the Rupiah, hence there remains a slight chance that MAS may wish to do the same in order to shore up the SGD. Even though SGD is a net exporting country, a strong SGD is still needed as a lot of necessities are imported from overseas, hence MAS will never allow SGD to depreciate indefinitely for fear of hyper-inflation. Therefore, do not take anything for granted, and traders should continue to keep a close eye as technicals reach a significant crossroad.
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