top fx market movers

Hong Kong And China
Rising to a record level, the yuan was boosted by news that Chinese officials will be included in this weekend’s G7 meeting.  Confirmed by German Deputy Finance Minister Thomas Mirow, the news buoyed the yuan against the dollar in the New York session.  Advancing on yesterday’s momentum, the Chinese currency pair broke through yesterday’s low and traded even lower at 7.7520 ahead of the close.  Incidentally, the Hong Kong dollar currency pair moved in contrast, rising above technical resistance in the session.  Trading above the key psychological 7.8100 figure, the underlying spot is offering suggestions of further upside in the USDHKD pair towards the instituted upper band of the fixed pegged currency.  The HKD move was surprising considering the inclusion of Chinese government officials in this weekend’s meeting.  Nonetheless, the invite does show the world the vast advancement that the country has achieved in recent years in the global forum.  Although currency fluctuations will obviously be covered, China is also expected to chime in on issues regarding global surveillance and imbalances between economies.  Separately, economic data was relatively absent for the Hong Kong economy, set aside from a report on the foreign currency reserves for the month of January.  For the first month of the new year, Hong Kong officials pared back investment in foreign reserves.  For the year-on-year comparison, reserves rose by 4.6 percent compared to a 0.4 percent monthly increase.  The decline in building local reserves stemmed from a weaker local currency as the Hong Kong dollar lost considerable ground against the US dollar.  The depreciation in the Hong Kong dollar was little incentive for policy officials to keep the pace of investment in US assets steady.

Triple Top Test For HKD
Finding support at the 7.8070, 100-SMA, the USDHKD bounced to retest previous double top resistance at 7.8130.  Closing barely above the level, odds are leaning in favor of a pullback towards support at the 7.8115, confluence of the 20-SMA and the R1 daily pivot.  Momentum indicators are in favor of the notion with a clear divergence in MACD and a Stochastic death cross.  Further downside to targets at 7.8100 will be reinforced with a close below the hourly session spike low of 7.8118 and the aforementioned support.  Bids will emerge at the 7.8100 as it coincides with a trendline from 7.7968 to 7.8026.  Conversely, should the session top be taken out, buyers will be eyeing the longer term resistance, coinciding with HKMA barriers.

Singapore Dollar
A pull back in the pace of investment was additionally witnessed in the Singapore economy.  For the month, total reserves actually declined slightly versus the $136.81 billion in December to $136.66 billion.  Notably, total reserves in US dollars declined for the first month in four as gold and FX reserves remained relatively unchanged at $208.43 billion.  The January report is also the first time since August that the Monetary Authority of Singapore elected to remain relatively flat in the market despite the appreciating Singapore dollar.  Usually during periods of appreciation, policy officials will elect to add to reserves as the purchasing power of the local Singapore dollar increases.   Including today, the underlying spot has advanced for the last seven sessions and continues to teeter at the nine month high.  A level that is seemingly unbreakable, the currency has fully tested the resistance figure at least three times in the last month and a half, with plenty of bidders still willing to take the currency higher.  Stock market performance is adding to the notion as benchmark records are being set seemingly every other day.  Ultimately, the trend is seemingly ready to continue heading into the G7 meeting this weekend with the dearth of economic data for the week.

USDSGD Downside Remains Plenty
Continuing lower since the retest at the 1.5360 last week, the USDSGD declined yet again finding near term support at 1.5300.  Momentum indicators are for another test at the current floor, with a potential break to a near term 1.5275, S3 daily pivot.  Stochastic is showing slight overbought conditions as MACD once again shows divergence.  Keeping pressure on the pair is the trendline from 1.5323 to 1.5337 as the 100-SMA adds pressure at 1.5340.  However, upside potential cannot be precluded.  A close above the session high of 1.5342 would see a short term build in momentum with the resistance at 1.5344, R1 daily pivot, providing a formidable barrier.  However, a close above the level would reinforce a push to 1.5369 as an early target, January 26 hourly spike low.

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