Chart of the Day USDSGD

USDSGD Key Weekly Reversal - Probable Price Path

US stocks had a rather indecisive week, experiencing abrupt swings but thus far still hold on to gains as of Thursday. Stocks had gotten a fresh boost at the start of the week after Moderna, a biotech company said that its preliminary vaccine trial on humans appeared to be positive. The optimism was short-lived as scientists, analysts, and media alike began to question the validity of the result given the trial’s small sample size. Week-to-date, the Dow Jones has added nearly 790pts or 3.3% while the S&P 500 and NASDAQ both secured 3% gains. While risk appetites generally returned this week, investor sentiment was cautious thanks to uncertainties surrounding the reopening of US economies and growing US-China animosity. The Federal Reserve minutes revealed officials’ discussion on adopting a clearer forward guidance on interest rate trajectory and provided reassurance that the central bank is ready to act more to support the economy. Other than that, the People’s Bank of China kept its 1- year loan prime rate steady at 2.85% and the Bank of Thailand cut its policy rate to a new low of 0.5%, its third cut reduction this year as Covid-19 crippled its once prosperous tourism sector. Oil prices continued to climb for the fifth consecutive week-Brent up by 11% and WTI added 15.3% week-to-date as outlook improves for oil demand. 

Chinese Foreign Ministry says China will take necessary countermeasures if US insists on undermining China's interests in regards to Hong-Kong related sanctions. US National Security Adviser O’Brien stated that the US government will likely impose economic sanctions on Hong Kong and China if China moves forward with national security law for Hong Kong. There were also separate reports that the US announced it will include 33 Chinese firms and institutions to an economic blacklist for actions including assisting Beijing spy on the minority Uighur population or allegations of ties to China's military and WMDs. (Newswires/NY Times)

Risk aversion looms from US-China relations and on potential second waves of the Covid-19 outbreak. This led to a rebound of the USD. US PMI remained extremely low (composite: 36.4 from 27) in May. Attention will likely be on initial jobless claims once again this week. The Beige book and Fed member comments may also give interesting takeaways, after FOMC minutes last week showed some exploration of further policy options. USDSGD has strengthened and outperformed other emerging Asia currencies in the recent week. SGD experienced a 0.42% WOW gain vs. the USD, to a low of 1.4121 on 20 May. This comes as Singapore announced plans to gradually lift circuit breaker measures against the Covid-19 pandemic, starting from 2 June. Besides, economic data was resilient, with a 9.7% YOY expansion in NODX in April. 

From a technical and trading perspective, the USDSGD posted a bullish weekly reversal candle last week as such bullish exposure should brewarded on a topside breach of last week's highs, bulls will initially look for a test of the Fibonacci retracement and extension objective at 1.4330/50 a closing breach of this resistance cluster would open a move to test bearish appetite towards 1.45. A daily close back through 1.42 would concern the bullish bias and suggest further range trading.

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