USD Corrects Overbought Condition and Singapore Boosted By China Optimism

The USD has fallen back on most other currencies as it corrects its overbought condition. The USD has also suffered as the market takes a bullish view of China re-opening its economy and the Chinese economy recovering from its downturn moving forward – As we point out in our article earlier today in terms of USD/CNH the optimism about China and a recovery is not supported by the facts.

Singapore Dollar and Global Trade

Gross domestic product (GDP) is forecast to rise by 0.5% to 2.5% next year, the Ministry of Trade and Industry (MTI) noted which is down from about 3.5% this year as the global economy slows. Singapore is the most sensitive country to global growth because international trade is huge in relation to domestic consumption. The outlook is grim for the global economy and the MTI Forecast in our view are very optimistic.

Global Trade Slowing Bearish the SGD

A globally weighted PMI index of new orders at manufacturers has reached the lowest level in two decades excluding the GFC and early 2020 Covid episodes.

Singapore is a major transport hub and the slow up in global trade can be seen in a sharp fall in terms of container charges on major shopping routes:

In terms of a slowing global economy or recession, the USD tends to appreciate as less USD's go into circulation in terms of loans which firms the USD - how important the USD is to global trade can be seen on the chart below:

the correction in the USD we expect to end and a major upside rally in our view is likely to unfold shortly

Technical Analysis

Below are the monthly and daily charts with our notes on the key levels of support and resistance to look out for. We see USD/SGD as a low risk high potential reward long trade on strength.