Weekly Outlook: Strong Growth Beacon For Singapore Dollar

Fundamental: Looking ahead, economic data issued from <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />Singapore will be heavily weighted towards the final days of the period.  The first indicator that will attract the fundamentally inclined will be Mondays report of retail sales for the month of August.  Truly the first, and arguably only, direct read of consumer spending in the country, the retail number will be of particular interest given the recent weakness in export numbers. <For Full Story See Below>

Full Story: TheSingapore dollar was trampled at the beginning of this week by poor data points, which has in turn led to a sizable 120-point slide against the units US counterpart in just three sessions.  Looking over the economic calendar over the past week, this drop seemed well founded with a drop in business activity, auto sales and a disappointing monetary policy meeting.  However, with the period ending on a strong note with a strong third quarter GDP report, this coming weeks data should find optimistic predictions that may bolster confidence in the Singapore dollar and correct its recent declines.

Looking ahead, economic data issued from Singapore will be heavily weighted towards the final days of the period.  The first indicator that will attract the fundamentally inclined will be Mondays report of retail sales for the month of August.  Truly the first, and arguably only, direct read of consumer spending in the country, the retail number will be of particular interest given the recent weakness in export numbers.  Sales are expected to increase on a yearly basis for the 18th consecutive month as tourist spending and strong labor trends issued through impressive economic growth keep the products moving off the shelves.  However, despite the trend of growth in sales for the past year-and-a-half, Julys increase was the slowest in eight months.  This shifts the burden on a drop in global energy prices through the month of August to help reinvigorate the trend into the final months of the year.  Moving along, the following day will hold vital export data for last month.  Shipments of goods other than petroleum products are expected to have risen 8.8 percent in the year through September.  This is a sharp rebound from Augusts 2.6 percent pace, yet would still be far off the trend seen through the previous three quarters.  Since October of 2005, exports had increased by double-digits percentages every month as demand from abroad has been driven higher along with their respective economies.  This trend was abruptly halted in July as weak month-over-month numbers began to throw the break on annual growth.  Rising interest rates around the globe have noticeably shaved spending habits in some of Singapores largest export destinations.  This is especially true in the US, the largest market for Asian-made goods.  Imports of such goods in the US have wavered in recent months as high energy prices and a mounting feeling of protectionism have trimmed spending, all while a sharp contraction in the nations housing market has eroded a significant portion of consumer wealth.

While the coming indicators have optimistic outlook tied to them, last weeks data was littered with a number of disappointing reads with a strong growth report to act as the silver lining.  Starting off with Tuesdays purchasing managers index for September, the bearish tone in the Singapore dollar began early.  According to the Singapore Institute of Purchasing & Materials Management, the headline PMI number slipped 0.6 points to 51.7 as nearly every component of the index slipped from previous levels.  The most important numbers from the report were the weak orders and production numbers.  A read of new orders slipped 1.7 points while that of new export orders sank 1.4 points.  Also interesting was the fourth consecutive month in which the employment component has produced a contractionary figure below the 50.0 level.  This consistency may be a sign that strong employment growth through the first half of the year could be turning.  Also important from the overall reported was the modest improvement in the heavily weighted electronics sector.  In September, the indicator grew for the third consecutive month as new orders and employment grew while prices slipped lower.  From the following day, the number of auto sales through the two weeks ending October 4th produced another jolt to the bearish overtone surrounding the currency.  All three categories of vehicle premiums fell markedly as global competition has picked up to win absorb the demand that has followed the drop in international gasoline prices.  Just yesterday, the two biggest fundamental events for the currency market took center stage.  Loosing its prominence to a surprise GDP number, the MAS monetary policy statement made few changes from its previous settings.  As was largely expected the group kept the exchange band in place while holding to its policy of a modest and gradual appreciation.  One source of interest on the other hand came through the high expectations for domestic growth.  Despite the slowing pace of consumer demand in a few key export destinations, the MAS predicted expansion to hold steady through 2007.  While this report may have fallen on many deaf ears, the growth report certainly drew in bullish sentiment.  The advanced register of third quarter GDP jumped 6.0 percent from the three months through June, the fastest pace since the fourth quarter of last year.  While the yearly figure had not trumped its own previous figure, it had also staved off the contraction in growth that had been expected with a 7.1 percent figure.  This figure was nearly in line with the monetary policy groups 7.5 percent project for the year and adds another feather in the hat of positive expansion since the third quarter of 2003.

Economic Releases for September 11 September 15

Technical: USDSGD The USDSGD has slipped from the 10/9 high at 1.5922 but remains above a trendline drawn through 1.5634 and 1.5814 (that trendline is near 1.5850).  Daily studies remain slightly bullish as price is holding above the 20 day SMA but oscillators are rolling over.  The 240 minute chart shows a triangle from the 9/20 high at 1.5928.  Price most recently bounced off of the resistance line from the triangle at 1.5922 and 240 minute RSI is sloping down and below 0.  This favors a test of the supporting line from the triangle near 1.5830.        

Key Levels & Technical Indicators