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US Dollar Outlook After USD/SGD Fell, MAS Eased Ahead of China GDP

US Dollar Outlook After USD/SGD Fell, MAS Eased Ahead of China GDP

Daniel Dubrovsky, Contributing Senior Strategist


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Singapore Dollar, USD/SGD, Monetary Authority of Singapore - Talking Points

  • Singapore Dollar strengthened despite MAS easing TWI appreciation slope
  • Data-dependent approach may have been cause as markets eye China GDP
  • USD/SGD may be torn between conflicting fundamental and technical cues

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Singapore Dollar Rose After MAS Monetary Policy Statement

Yesterday, the Monetary Authority of Singapore eased its main tool of managing the economy by reducing the rate of appreciation in the Singapore Dollar against an undisclosed basket of currencies. Because of Singapore’s heavy reliance on trade, the central bank focuses on managing the currency rather than setting benchmark lending rates. Yet, despite these actions, the Singapore Dollar rose over the past 24 hours.

Read my Singapore Dollar Overview to Learn More About how the MAS manages monetary policy

At its semi-annual meeting, the MAS also maintained the width and center of the currency band. What might have driven demand into the SGD was a combination of medium-term economic forecasts with a data-dependent approach. This is something that we have seen similarly from the Federal Reserve, where ongoing interest rate cuts are seen as insurance moves rather than the beginning of an easing cycle.

The Monetary Authority of Singapore anticipates growth to pick up modestly in 2020, though the level of output “will remain below potential”. However, they mentioned that this is subject to “considerable uncertainty” given the external environment. This is a reference to the ongoing US-China trade war that has been impacting Singapore’s economy noticeably – see chart below.

Singapore Economy Taking a Toll as Trade Wars Linger

Singapore Economy Taking a Toll as Trade Wars Linger

As for their inflation outlook, it is expected to be “muted”. While the core CPI measurement “is likely” to remain below its historical average, it is expected to rise gradually over the medium term. Finally, the MAS “is prepared” to recalibrate policy should these prospects for CPI and GDP weaken significantly. With that in mind, the outcome of trade talks between the world’s largest economies will continue impacting SGD.

Read this week’s ASEAN fundamental outlook to see what is in store for the SGD ahead!

Why the Singapore Dollar Could Weaken Ahead

The push higher in the SGD against USD could be traced back to the previous week, where hopes of a US-China trade deal fueled risk appetite and sapped the appeal of the liquid Greenback. But, since then sentiment has struggled to find follow-through as the MSCI Emerging Markets Index fell on Monday, repeating an eerie bittersweet performance in the aftermath of the US-China trade truce from June.

Given the nature of unpredictability in talks between the two nations, there is no guarantee that the partial deal reached last week can translate into an official signing. But, it is a step in the right direction. Should talks fall apart, the SGD risks reversing its recent progress. In the near-term, it could also underperform if third quarter Chinese growth disappoints, underpinning concerns about the health of the global economy.

Join me at 1:45 GMT on Friday for LIVE coverage of China GDP where I will be discussing the Australian Dollar and ASEAN FX

USD/SGD Technical Analysis

On the daily chart, USD/SGD has accelerated its decline after a close under the rising trend line from June. This also followed the formation of a Symmetrical Triangle candlestick pattern. Usually, this is a continuation pattern but at times can act as a reversal of the ongoing trend.

The target of this pattern could bring the currency pair to the rising trend line from 2018. This is calculated by applying the distance of the widest point of the triangle to the breakout point. Thus far, key support was also taken out which is a psychological range between 1.3707 to 1.3725.

USD/SGD Daily Chart

USD/SGD Daily Chart

Chart Created in TradingView

Singapore Dollar Trading Resources

--- Written by Daniel Dubrovsky, Currency Analyst for

To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.