The USD/SGD price declined below a key support level after the relatively strong Singapore GDP data and the overall bullish emerging market currencies. It fell to 1.3370, which was the lowest level since March 5.
Singapore GDP data
Singapore has done relatively well during the coronavirus pandemic. The country had fewer infections and deaths and demand for its products helped sustain the economy. Further, its close proximity to China at a time of rising tensions helped attract more global companies to the country.
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The USD/SGD pair dropped today after the country’s statistics agency published the latest GDP numbers. Preliminary data showed that the economy rose by 0.2% in the quarter after falling by 2.4% on a year-on-year basis. This increase was better than the median estimate of a 0.2% slump. The economy rose by 2.0% on a quarter-on-quarter basis.
This growth was due ro a 3.3% improvement of the goods manufacturing sector that rose by 3.3%. It was partially offset by the services producing industries that declined by 1.2%. Services struggled because sectors like wholesale and retail and accommodation and food services are yet to recover because of the pandemic.
The USD/SGD pair also declined because of the overall strength of emerging market currencies. The MSCI Emerging Market Currency index rose today because of the ongoing risk-on sentiment. That happened as a response to the US consumer price index (CPI) data that were released yesterday. The data revealed that the headline CPI rose to 2.6%, the highest level in almost eight years.
While this figure was above the Fed’s target of 2.0%, analysts believe that the current inflationary pressures are temporary. That’s because oil prices have started to stabilise while the ongoing logjam at American ports will be temporary. Also, the impacts of the recent stimulus will start to wane.
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USD/SGD technical forecast
The four-hour chart shows that the USD/SGD pair dropped below the important support at 1.3388, where it had struggled to move below before. It also dropped below the support at 1.3376 and the 25-day and 15-day exponential moving averages (EMA) while the Relative Strength Index (RSI) is approaching the oversold level. Therefore, in the near term, the pair will likely keep falling as bears target the key support at 1.3300.