USD/SGD forecast after the strong Singapore GDP upgrade

The USD/SGD price tilted lower after the relatively strong Singapore GDP data. The pair dropped by a few pips to 1.3583, which was slightly below Tuesday’s high of 1.3600.

Singapore GDP data

The Singapore economy is making a strong recovery helped by a strong domestic and foreign market. In a report published on Wednesday, the country’s Ministry of Trade and Industry said that the economy expanded by 14.7% year-on-year in the second quarter. This was a strong performance than the 1.5% growth experienced in the first quarter. The economy remains about 0.6% below where it was before the Covid pandemic.

The manufacturing sector rose by 17.7%, helped by the transport and precision engineering sectors. Most of the other manufacturing sectors also did well in the first quarter. The industry shrank by 2.5% on a quarter-on-quarter basis.

Other sectors like construction, wholesale trade, retail trade, accommodation, and food and beverages all grew by double digits in Q2. 

The USD/SGD also reacted to the strong forward guidance. According to the MTI, the economy is expected to expand by between 6% and 7% in 2021. This was better guidance compared to the previous range of between 4% and 6%. 

Recent numbers from Singapore have been relatively strong. For example, the country’s retail sales jumped by 25.8% in June to more than S$3.3 billion. Without motor vehicles, the sales rose by 19% to S$2.7 billion. The online sales proportion increased by 15.4%. 

Later today, the USD/SGD will react to the latest American consumer price index (CPI) data. The numbers are expected to show that the headline CPI rose by 5.3% in July while the core CPI rose by 4.2%. If analysts are right, the numbers will show that the Fed is right to warn about the transitory nature of these figures.

USD/SGD technical analysis

The four-hour chart shows that the USD/SGD pair declined to a low of 1.3472 last week. This was a notable level since it was slightly below the 38.2% Fibonacci retracement level. Since then, the pair has been on an upward trend and is currently slightly above the 23.6% retracement level.

The pair has also risen above the 50-day and 25-day moving averages and formed a V-shaped recovery. Therefore, there is a possibility that the bullish trend will continue as investors target the key resistance at 1.3690.