USD/SGD hits resistance as Singapore coronavirus cases surge

The USD/SGD rose as investors reacted to the rising number of coronavirus cases in Singapore and the falling oil prices. The pair has gained by more than 6 per cent this year.

Singapore coronavirus cases rise

Singapore is back in the spotlight as the number of coronavirus cases continued to rise after weeks of stagnation. According to official data, the number of daily cases rose by more than 1,000 people yesterday, bringing the total number of infections to more than 9,000. This is the highest number of cases in south-east Asia.

In a statement yesterday, Singapore prime minister, Lee Hsien Loong said that the city would extend its lockdown to June 1. The lockdown, which was started early this month, encouraged people to shut their businesses. Schools were also closed and people were encouraged to stay at home. These early measures led to lower number of infections, leading to praise for the city from around the world.

The city’s early actions also helped it economically. In March, non-oil exports rose by more than 17%, which was higher than the consensus estimates of a 8.9% decline. The exports were helped by shipments of non-electronics like non-monetary gold and specialised machinery. Imports also increased by more than 12% in the month.

Therefore, as lockdown extends, the city’s economy is expected to fall deeper into a recession. Just last month, data from the statistics office showed that the economy shrank by an annualized rate of 2.2 per cent in the first quarter. It declined by more than 10 per cent QoQ. This means that the second quarter numbers will likely be worse.

In response to the crisis, the government has launched a stimulus package worth $40 billion, which is about 11 per cent of GDP. Part of the funds came from the city’s reserves, which was the second time it has done that. Meanwhile, the Monetary Authority of Singapore (MAS) has also intervened. The central bank lowered interest rates and announced other easing measures. The bank has also launched a $125 million program for financial companies to help them weather the current challenges.

Singapore dollar has also been hurt by the current falling crude oil prices. While Singapore oil exports have been falling, the city is one of the leading places where the commodity is traded. These challenges have been compounded by the fall of Hin Leong, one of the biggest oil trading companies in the city.

US dollar strength

On the other side of the USD/SGD pair, the US dollar has also been on an upward trend. The closely-followed dollar index has risen by more than 3.5 per cent this year. It has done this at a time when the US economy is going through its biggest economic challenge since The Great Depression. It has also risen in a period when the Federal Reserve is printing trillions of dollars through quantitative easing.

Just last week, numbers from the US showed that more than 5.2 millionAmericans filed for unemployment benefits in the previous week. This brought the total number in the past four weeks to more than 22 million.

Yesterday, data from the US showed that the housing market is struggling. Existing home sales declined by more than 8 per cent in March. They declined from 5.76 million to 5.27 million. Other numbers like industrial production, manufacturing activity, and retail sales have weakened also.

Experts believe that the dollar strength is partly because of its role as a reserve currency of the world. This role has led to significant demand for the currency. Another reason is that other economies that are part of the dollar index are not doing good either.

USD/SGD technical outlook

The USD/SGD pair formed a double bottom position around 1.4116 between 10^th and 15^th April. It then moved upwards and found resistance at the 61.8 per cent Fibonacci retracement level. The pair has also been forming a descending triangle pattern. The tip of this pattern is relatively far. Therefore, I expect the pair to move lower back to the Ichimoku cloud and possibly retest the 50 per cent retracement at 1.4200.