USD/SGD: Most overbought in 5 months after Singapore retail sales data

Written by: Crispus Nyaga
March 5, 2021
  • The USD/SGD rose sharply after the latest Singapore retail sales data.
  • The overall sales dropped for the second consecutive month.
  • Singapore dollar declined as part of the EM currencies sell-off.

The USD/SGD price rose for the fourth consecutive day after weak Singapore retail sales data and the general US dollar strength. The pair rose by 0.40% to the highest level since December last year.

USD/SGD chart

Singapore weak retail sales data

In a report today, Statistics Singapore said that the retail sector was pressured in January. In total, the overall retail sales declined by 1.8% in January after falling by 1% in December. This monthly performance led to an annual decline of 6.1%. 

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The value of all retail sales declined to S$3.8 billion, with online sales representing a 10% of the total value. Without motor vehicles, the total sales were S$3.2 billion. Separately, food and beverage sales declined by 24.7% to S$720 million.

Earlier this week, the USD/SGD price reacted to the relatively weak Singapore manufacturing PMI data. According to Markit, the overall manufacturing PMI declined from 50.7 in January to 50.5 in February. Still, the index remained above 50, which is a sign that manufacturers are doing well. 

Still, analysts expect that the Singaporean economy will do better this year. The country has already started delivering vaccines and more travelers are expected to visit this year. Also, demand from its neighbouring countries will keep rising.

The USD/SGD pair has also risen because of the overall weakness of emerging market currencies as US yields keep rising. The ten-year yield increased to 1.50% for the second time in the past two weeks. 

The performance of the bond market is mostly because of the rising inflation expectation as the US moves to implement another $1.9 trillion stimulus. Other emerging market currencies like the Mexican peso and Brazilian real have also declined.

USD/SGD forecast

Singapore dollar
Singapore dollar chart

The USD/SGD pair has been in a sharp upward trend in the past few weeks. On the four-hour chart, it has moved above the important resistance at 1.3390. It is also along the upper side of the Bollinger Bands while the Relative Strength Index (RSI) has moved to the highest level since September last year. Therefore, while the upward trend will likely continue, we should not rule-out a short-term pullback to 1.3390.