The Singapore dollar just does not have the liquidity to fight a sudden panic move into the greenback.
The US dollar initially on Wednesday to reach the 1.3833 level against the Singapore dollar. However, there have been enough buyers to turn the market around and show signs of life yet again. Ultimately, this is a market that looks as if it is trying to break above the 1.40 level given enough time, but obviously, this has been a bit of a stretch.
The strength of the US dollar has been quite impressive over the last several weeks, and I think that given enough time we will continue to see more strength, especially when it comes to smaller currencies such as the SGD. The market is clearly bullish, but the occasional pullback is best thought of as a potential buying opportunity as it could offer you a bit of value in the greenback. Keep in mind that there is a multitude of reasons why the US dollar is strengthening, and you need to keep all of them in mind. The first thing would be that the Federal Reserve is looking to become very hawkish, and that drives up the yields in the bond market, making the US dollar more attractive. Furthermore, inflation is going to continue to be a major problem for most economies around the world, so people will run to the US dollar for safety.
When you look around the world, this is a dire situation for a lot of markets, although it should be noted that the economy of Singapore will probably be quite a bit more stable than some of the other ones. The 1.38 level underneath should be supported, and most certainly the 1.37 level will be on any type of significant pullback. I think it is a likely move that we see to reach the 1.40 level more than anything else.
Keep in mind that a lot of what we are seeing is everybody running for the US dollar in one shot, and that is going to transfer not only to this pair but multiple other smaller pears as well. The Singapore dollar just does not have the liquidity to fight a sudden panic move into the greenback. The 50-day EMA is approaching the 1.37 level, which I would consider to be the “bottom of the overall uptrend.”