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It seems that after controlling the first wave of coronavirus infections, Singapore now faces a second wave of cases from returning travelers.

Twenty-three new coronavirus cases were announced on Sunday night by Singapore’s Ministry of Health (MOH).

This past Saturday, Singapore reported its first two confirmed deaths related to the COVID-19 outbreak.

With new coronavirus cases in Singapore rising, most of them “imported”, meaning they’re from people coming into the country, Singapore is now banning all tourists starting this Monday, March 23.

All short-term visitors will now not be allowed to enter or transit through Singapore. This includes tightened travel restrictions on work pass holders and dependents

These measures now being taken to deal with the outbreak will hurt the Singapore economy.

While the entire economy will be impacted in some way, if you look at just the contribution of travel and tourism to GDP (% of GDP) for Singapore, that’s around 10%.

That’s over $30 billion dollars and a lot of that is about to vanish.

Singapore could be facing an economic apocalypse.

But it’s not just Singapore that’s suffering, the pandemic is affecting the entire world.

And like I mentioned in my most recent USD/ZAR trade idea , when the world is in crisis mode, traders rush to safe haven currencies.

Safe haven currencies are currencies that are expected to retain or increase in value when it seems like the world is coming to an end (geopolitical stress).

The U.S. dollar (USD), along with the Japanese yen (JPY) and Swiss franc (CHF) are considered safe haven currencies.

When there’s a lot of uncertainty in the world. there is usually a “flight to safety” to one or all of these currencies.

But when there is global panic, and the financial markets are trying to deleverage and destress, this is when USD thrives.

What’s going on right now in the FX market is an example of the Dollar Smile Theory in play.

If you’re not familar with the Dollar Smile Theory, check out our lesson here.

This is an unprecedented event and the magnitude of the impact on the economies of countries all over the world will be profound.

I expect market turmoil to continue o my bet is that USD/SGD will continue to rise as traders prefer the U.S. dollar over the Singapore dollar.

According to MarketMilk™, USD/SGD is in a strong bullish trend.

Check out its Trend Following Rating on the daily (1D) timeframe…

USD/SGD on MarketMilk

Let’s go to the charts and look at USD/SGD’s weekly (1W) chart…

USD/SGD Weekly Chart

You can see that between last July until this February, USD/SGD had been trading in a tight range between 1.35 and 1.38 (dashed red lines).

Price broke out that range, re-tested the previous resistance-now-turned-support area of 1.38, and has now continued its uptrend.

The next major resistance area is….was the 1.44 level (dashed red line).

Notice how the weekly candle was able to close above that level.  This is bullish, especially considering the size of the candle. It was almost a white marubozu.

Including the previous week’s candle, are we going to see a three white soldiers candlestick pattern form at the end of this week? 🤔

USD/SGD Daily Chart

If we zoom in and look at a daily (1D) chart, we can see that price closed above 1.44 on Thursday.

On Friday, the price did fall back below 1.44 but still managed to close back above it.

The 1.44 support level held.

Will it hold this week or will we see a trend reversal?

One could take the bearish view that the last candle formed a hanging man, and with so many consecutive daily green candles prior to it, this could be the top and now it’s time to go short.

It’s a good argument but I don’t think the mad dash for U.S. dollars is done yet given the uncertainty the pandemic is causing so I remain bullish rather bearish here.

If price can remain above 1.44, where is the next major resistance level?

We have to look at a monthly (1M) chart to find this…

USD/SGD Monthly Chart

The next resistance area is 1.55.

After that, it’s 1.70. 😲

Could USD/SGD rise all the way do 1.70?!

Given current global conditions, it’s possible. It depends on how bad it gets.

Here’s my trade idea…

Go long USD/SGD at market (1.4500).

Take partial or full profit at 1.55.

I plan to take off at least half my position if it gets there. I will reassess later whether to fully exit instead.

My initial stop loss will be if price closes below the 20 SMA on the daily chart.

As long as USD/SGD remains above its last month’s high of 1.4087, I remain bullish.

But I will also monitor price momentum. If I think buying pressure is fizzling out, I may cut my losses even sooner.

 

This content is strictly for informational purposes only and does not constitute as investment advice. Trading any financial market involves risk. Please read our Risk Disclosure to make sure you understand the risks involved.