Weekly Outlook: Inflationary Pressures Will Likely Lend Further SGD Support
Full Story: Rebounding off of a failed upside test of the 1.5920 figure, the Singapore dollar has broken through key levels to the downside once again as traders are resurfaced to take the emerging market currency lower. Now forming a consolidation stance at the 1.5780, exactly 140 points lower, bidders are remerging in the near term on a profiting pullback. Likely setting targets for the 1.5820 figure, further offer sentiment may be intact should the current support fail to hold.
With plenty of consumer suggestions out of the way, traders will likely be eyeing the consumer price index for the month of September. Rising by 0.7 percent in the previous report, expectations are for inflationary suggestions to pull back once again as commodity prices have declined leading to lower prices at the consumer level. The overall headline figure is surprising considering the increases seen in several key sectors. Notably, clothing and footwear prices were higher by 2 percent in August on the annualized comparison with housing higher by 2.1 percent. Coupled with healthcare increases of 0.8 percent in the month, consumer prices, for the first eight months of the year, rose 1.2 percent in the annualized comparison. The rate is comparably lower than most industrialized nations and makes the case for no further tightening measures by the Monetary Authority of Singapore. Separately, Automobile COE open bids will have little weight on the underlying currency in the next week. A thin reflection of overall consumer demand, the bids are likely not to be considered by the market with most of the focus being placed on the CPI report.
Comparatively, retail sales figures remained well supported in the month of August, rising slightly below the consensus view. According to the Singapore Department of Statistics, retail sales jumped by 4.1 percent in the month on an annualized comparison. Led by purchases in apparel and footwear, which vaulted higher by a whopping 20.2 percent, sales in supermarkets, computers and recreational goods additionally saw gains to contribute positively to the overall figure. The total retail sales value stood at approximately S$2.23 billion. Even more encouraging were the no-oil domestic exports for the month. Rising 8.3 percent, exports for September eclipsed the 2.6 percent increase witnessed in the previous report. For the month, the survey reversed the 6.4 percent decline rising by 4.6 percent according to International Enterprise Singapore. Electronics exports, constituting about half of the non-oil survey, rose by 0.4 percent in the month, slowing from a previous 3.9 percent tick higher. Subsequently, semiconductors and pharmaceuticals saw the largest boost, as semiconductor exports increased by 21.6 percent with pharmaceutical goods jumping 59.6 percent higher. As a result, the survey continues to support the view that the economy is well on its way thanks to a strong and viable export sector.
Economic Releases for October 18 October 24
Date Event GMT EST Consensus Previous 10/18 Automobile COE Open Bid Cat A 8:00 4:00 -- 12001 10/18 Automobile COE Open Bid Cat B 8:00 4:00 -- 12501 10/18 Automobile COE Open Bid Cat E 8:00 4:00 -- 13000 10/23 Consumer Price Index (YoY)(SEP) 5:00 1:00 -- 0.7% 10/23 Consumer Price Index (MoM)(SEP) 5:00 1:00 -- 0.0%
Technical: The USDSGD has declined from what appears to be a triangle on the daily. Probability now favors a decline towards the bottom of the triangle near 1.5650. Triangles are often 5 waves and alternate waves are often related to each other by Fibonacci multiples. For example, wave 3 on the chart below is approximately 61.8% of wave 1. Going forward, well look for this wave (wave 4) to be approximately 61.8% of wave 2. Wave 2 is from 1.6033 to 1.5634 (399 pips). 61.8% of 299 is 247 and wave 4 begins at 1.5922. Thus, a potential terminal point for wave 4 is 1.5922 247 pips = 1.5675.