Singapore Dollar: Upside risk capped against US Dollar – UOB

United Overseas Bank’s (UOB) Quek Ser Leang and Lee Sue Ann note USD/SGD stayed broadly flat on Wednesday, trading between 1.2804 and 1.2825 and closing at 1.2810. Their Singapore Dollar (SGD) Nominal Effective Exchange Rate (NEER) model suggests the basket will remain 1.5–2.0% above its mid-point, implying a 1.2756–1.2820 range. Near term, downside risk persists but further declines require a clear break below 1.2790.

Dollar soft but still rangebound

"24-HOUR VIEW: Two days ago, USD traded within a range of 1.2815/1.2840, closing largely unchanged at 1.2819 (-0.06%). Yesterday, we pointed out that “momentum indicators are mostly flat,” and we expected USD to “trade in a range between 1.2805 and 1.2840.” USD subsequently traded within a tight range of 1.2804/1.2825 before closing largely unchanged again at 1.2815 (-0.03%). Despite the quiet price action, the underlying tone has softened somewhat. Today, USD could edge lower, but given the lackluster downward momentum, any decline is unlikely to reach 1.2790. Resistance is at 1.2820, followed by 1.2830."

"1-3 WEEKS VIEW: Our most recent narrative was from Monday (03 Aug, spot at 1.2815), when we highlighted that while the recent strong momentum “suggests further downside risk, USD must break and hold below the significant support at 1.2790 before further declines are likely.” Although USD subsequently tested 1.2790, it has not been able to make further headway on the downside. That said, we will continue to hold the same view as long as 1.2850 (‘strong resistance’ level previously at 1.2860) is not breached. Looking ahead, the next level to watch below 1.2790 is 1.2765."