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Chart of the day: Singapore dollar weakens, tests multi-month resistance

The Singapore Dollar (SGD) weakened considerably yesterday after the Monetary Authority of Singapore (MAS) indicated (5 February) an easing bias, noting sufficient room in the policy band to accommodate the weakening outlook.

USDSGD daily chart

USDSGD gained over 100 points yesterday as the SGD weakened to an almost four-month low. Traders are expecting several Asian central banks to ease policy as they grapple with the coronavirus disruption.

After yesterday’s significant SGD weakening, the pair pushed higher again today, now testing multi-month resistance at 1.3865. The question now is how much further can the currency weaken? The 20 day rate of change (ROC) at the bottom of the chart (blue line) shows the most rapid change in price since April 2018. Trend suggests this is peaking and should cool soon.

A meaningful move in USDCNH above the critical 7 level would increase easing expectations in Singapore and give room for further weakening.

The MAS already had easing in its plans to manage economic headwinds from the US-China trade war. Coronavirus has strengthened its stance. Officially, the policy outlook remains unchanged for now, with the next review in April.

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