Weekly Outlook: Pullback In Singapore Dollar Likely On Bearish Reports

Fundamental: Leaning on the side of retracement in the currency pair is this weeks dose of slightly less bullish economic data.  Sparking off the week will be the purchasing managers index for the month of September.  Although rising to 52.3, above the 50 expansionary minimum in the survey, the current report is expected to decline to a 51.9 print.  <For Full Story See Below>

Full Story: Weakening in the beginning of the week, the <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />Singapore dollar strengthened towards the end, as expected as the technical level at 1.5900 held further bids to a minimum.  Breaking through the 1.5860 and 1.5840 support floors, the underlying currency has reached a bottom just above the 1.5820, and remains below the 50 simple moving average in the 10-minute chart.  Likely to remain on the support and possible range bound scenario, the underlying currency may retest previous support at the 1.5860 figure before making a run higher.<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

Leaning on the side of retracement in the currency pair is this weeks dose of slightly less bullish economic data.  Sparking off the week will be the purchasing managers index for the month of September.  Although rising to 52.3, above the 50 expansionary minimum in the survey, the current report is expected to decline to a 51.9 print.  Although attributed to rising new orders and increasing export orders, the survey should be expected to pullback after five consecutive months of expansive growth.  Last month, the reading rose 1.3 points higher to print a 52.3 reading.  The report is indicative that manufacturing continues to remain a pillar of growth for the economy which is expected to expand at a 4.1 percent rate.  Also expected to the downside are the advanced gross domestic product figures.  Although a simple estimate for the third quarter, overall growth is expected to thin slightly, rising by only 1.4 percent in the quarter, dropping more than 50 percent from the 3 percent advancement seen in the previous quarter.  Subsequently, the quarterly measure is likely to pull the annualized figure lower to 6.9 percent from the 8.1 percent witnessed earlier.  Separately, aside from the key reports on the week, the market will be privy to automobile COE open bids and foreign reserves.  Open bids, thinly reflective of overall consumer strength is expected to remain well within the range that has been witnessed over the past four weeks with foreign reserves likely to increase.  Although central bank speculation usually accompanies a major currency pair through the decision, the upcoming announcement is likely to garner little attention as the decision is likely to be an incremental change, if anything.

Surprisingly, the weeks data was less than expected, giving traders plenty of reason to dump the Singapore dollar.  Declines in consumer price inflation were reported at the beginning of the week.  Rising by 0.7 percent in the annualized figure for the month of August, the most recent report falls below the 1.2 percent pace printed in the previous month.  Prices of clothing and food rose 2 percent for the year on year as housing prices jumped 2.1 percent according to the Singapore Department of Statistics.  The lower rate of inflation is likely to keep monetary authorities sitting on their hands with no fluctuations in the Interbank rate expected in the near term.  Industrial production additionally fell through, more like a drop through the floor, as productivity rose by 5.5 percent.  Although still considered optimistic, the figure was well below the consensus figure of 12.3 percent as the seasonally adjusted figure plummeted by 11 percent.  The actual figure pales in comparison to the 19.8 percent witnessed in the month of July.  The only tidbit of evidence that inflationary pressures were alive in the economy came from higher than expected money supply figures.  Increasing amounts of cash following dwindling supply usually drives price inflation.  For the month, both measures of annualized money supply rose higher than the previous, as bank loads rose.  The reports, although supportive of a tightening bias, are likely to conjure little in rising rate.

Economic Releases for October 3 October 10

Technicals: USDSGD The USDSGD has declined to the 38.2% fibo of 1.5634-1.5928 at 1.5816 today.  Add ional support is just below at the 22 day SMA at 1.5806.  It is possible that a triangle is forming from the 1.5928 high on 9/20.  A break below 1.5788 would negate the triangle formation and likely lead to a deeper retrace of strength towards the 61.8% fibo of the mentioned bull wave at 1.5746.  In any case, the downside looks limited as RSI on the 240 minute is crossing above 30.    

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