Originally published by AxiTrader
Recently I wrote a note which highlighted that USD/SGD was approaching important trendline resistance and that a break would signal a trend change.
This morning, as Asian trade opens, USD/SGD is trading at 1.3974 and starting its second day outside and above that trendline which stretches back to the early January high at 1.4545.
That's important because in many ways USD/SGD has been as much about the ebb and flow of the US dollar as any currency on the planet over recent months and has chosen a solid correlation with the overall move in the US Dollar Index.
Which is why I say the break out in USD/SGD, if it holds and builds, Could be the signal I've been waiting for that the US dollar is turning.
Why the Singapore dollar and not the euro or yen you'd be right to ask.
The reason is that in my analytical framework dollar-sing sits as the developed world's emerging market. The Singapore economy is immersed within Asia and at the heart of global trade.
Yes it has the MAS as a strong custodian of interest rates and the value of the Singapore dollar that doesn't mean USD/SGD doesn't show variability as it traded in a 12 or 13 big figure wide range over the past few years.
And as the relationship with the US dollar shows USD/SGD is strongly tied to moves in the US dollar.
So my working hypothesis is that USD/SGD is driven by sentiment toward its own and global growth, toward emerging markets more broadly, MAS policy, and the US dollar. But it's also free of the political turmoil of many other jurisdictions and as such represents a "cleaner" US dollar bet in many respects.
Which brings me to the USD/SGD chart as it stands this morning.
As it stands even though USD/SGD has broken higher at 1.3975 this morning my system still requires it trade a little higher before it suggests a confirmation of the break.
The level I'm watching, as before, is 1.4000/10. If USD/SGD breaks this level we'll know the canary in the coal mine of global bearish US dollar trades is singing.
And that would suggest broader US dollar strength across the forex universe.
Have a great day's trading.