USD/SGD: Bullish breakout possible as reflation trade sets in

The USD/SGD price is in a tight range as the US Treasury yields rise and after the relatively better Singapore retail sales numbers. It is trading at 1.3462, which is a few pips below the March high of 1.3530.

Singapore retail sales data

The retail sector is pivotal for the Singapore economy because of the vast number of people it employs. Data released by the Singapore statistics agency showed that the sales declined by 1.6% in February this year. This was a better decline than the previous decline of 1.7%.

This decline led to a year-on-year increase of 5.2%, which is substantially better than the previous decline of 6.1%. Excluding motor vehicles, the sales rose by 7.7% in February.

In total, the volume of retail sales rose to S$3.3 billion, with the online portion being 10.1%. Excluding autos, the sales were worth more than S$2.8 billion.

Analysts expect that the Singapore economy will continue firing on all cylinders. For one, as the world boosts vaccination, the vital Singapore tourism sector will bounce back. Furthermore, people who have avoided traveling in the past year are looking forward to more travel. Further, the demand for the country’s manufactured products will keep rising.

The USD/SGD is also in a tight range as forex investors react to the ongoing reflation trade following the strong US employment numbers published on Friday. The data revealed that the American economy added more than 900k jobs while the unemployment rate declined to 6.0%. 

Therefore, analysts believe that inflation will keep rising, which will lead to higher interest rates earlier than expected. Indeed, the bond market is signaling that this will happen. The yield of the 10-year US Treasury yield has surged to 1.72%, which is slightly below last week’s high of 1.76%.

USD/SGD technical analysis

The four-hour chart shows that the USD/SGD pair has been moving sideways recently. It has remained between the support and resistance levels at 1.3390 and 1.3495, respectively. Today, it is a few pips above the 25-day and 15-day exponential moving averages (EMA) and is slightly below the resistance at 1.3495. It is also slightly above the 23.6% Fibonacci retracement level. 

Therefore, the pair may keep rising as bulls attempt to move above this resistance level. However, a drop below 1.3450 will invalidate this trend.