- The USD/SGD is trading near the 1.34180 ratio early this morning.
- While the SGD/USD has climbed rather consistently since last Thursday, when the U.S Producer Price Index showed a surprisingly stronger data result regarding inflation, the cause for today’s price velocity is more complicated.
- The USD/SGD was trading near the 1.33900 level early today, but suddenly began to exhibit a lot of buying and broke through resistance levels of 1.34000 with relative ease.
Why? It is likely financial institutions in Singapore and globally were reacting to the Bank of Japan monetary policy change. The BoJ officially stopped their 8-year run of negative interest rates this morning and implemented a rate hike. The reason why that may have played a factor in the sudden jump of the USD/SGD is because behavioral sentiment in financial institutions may have reacted to the notion the Federal Reserve will remain tougher on inflation than had been hoped.
Not a Surprise, but an Acknowledgment of Hawkish Fears
While last week’s inflation data from the U.S was stronger than anticipated via the PPI, the BoJ’s move this morning likely cements the notion that global central banks are being confronted by inflation. Yes, financial institutions may have anticipated the move by the Bank of Japan, but the hike may have caused them to consider the potential the Federal Reserve may remain more hawkish.
The ability of the USD/SGD to climb above the 1.34000 level and sustain value early this morning is intriguing and should be watched by day traders. If the currency pair maintains its higher stance going into tomorrow’s FOMC pronouncements from the U.S Fed, this will generate more volatile reactions.
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USD/SGD and Central Bank Reactions
The USD/SGD was trading near the 1.33150 ratio last Thursday, this after being able to trade below the 1.33000 level on Tuesday of last week. The move higher in the USD/SGD clearly shows reactions to Tuesday’s CPI report and then Thursday’s PPI statistics. Both reports showed inflation remains stubborn.
- The Federal Reserve is not expected to announce any major monetary policy changes tomorrow, what traders will react to is the rhetoric regarding mid-term interest rate policy outlook.
- Stubborn inflation continues to shift behavioral sentiment in the USD/SGD and other major currencies teamed against the USD. This morning’s move higher in the currency pair shows cautious attitudes have generated force in financial institutions.
- If the Fed hints tomorrow that interest rates are not going to be cut aggressively this year and the central bank is taking a wait and see approach, trading in the USD/SGD will remain choppy as equilibrium is sought late tomorrow and early on Thursday.
Singapore Dollar Short Term Outlook:
Current Resistance: 1.34225
Current Support: 1.34090
High Target: 1.34635
Low Target: 1.33960
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