The Singapore dollar has been trading down against the greenback for the past few days, but charts suggest that medium to long term, the City dollar is keeping its upward trend, indicating that the recent policy action aimed at arresting further appreciation of the currency may not get its result.
Charts indicate the Singapore dollar targets 1.3200/USD in the near term, which would be a one-year high for the local currency. (See the chart below)
The Monetary Authority of Singapore at its semiannual policy decision on 13 April flattened the trading band for the USD/SGD pair aiming to arrest sharper rally in the Singdollar as it would worsen the prospects of City's exporters.
The MAS guides SGD against a basket of currencies and adjusts the pace of its appreciation or depreciation by changing the slope, width and centre of a currency band. It doesn't disclose details on the basket, or the band or the pace of appreciation or depreciation.
The local dollar which was trading near a multi-month high of 1.3414/USD ahead of the decision weakened to 1.3668/USD after that, but then reversed the course to hit a new 8-month high of 1.3350/USD on 19 April.
Fundamentally, this move suggests that the MAS decision was not strong enough to result in a shift in the appreciation path of the SGD while charts reinforce that view technically.
The GDP data from the Ministry of Trade and Industry on 14 April showed that the Singapore economy expanded 1.8% in the first quarter of 2016, which was slightly more than expected.
A survey of private economists by the MAS last month had forecast the Q1 economic growth at 1.6% while the Singapore government has said it expects the economy to grow by 1-3% in 2016.
In January, the USD/SGD pair had hit a high of 1.4444 before turning south. The downward move thereafter in the pair has resulted in about 8% gain for the Singdollar when it traded near 1.3400/USD.
The supports USD/SGD had since the downward move began at the start of this year had been 1.3950, the 23.6% Fibonacci retracement of the 18-month rally, 1.3650, the 38.2% level, and as the latest, 1.3400, the 50% level.
Obviously, the next target traders see will be 1.3200, which falls on the 61.8% retracement line.
The downward crossover of short term moving averages above the 50-period moving average on the weekly chart near 1.3900 also looks like a downside signal.