USD/SGD looks like it’s topped out for now.
Recently, the 20-day SMA had acted as a dynamic support level.
But today, it finally closed below it.
So I decided to cut my losses and exit at 1.4235.
This is a loss of 265 pips or 1.8%.
This trade wasn’t looking good when it USD/SGD failed to make a new swing high and instead made a lower high after hitting resistance at the 1.4400 level.
I will continue to stalk this currency pair since I still think the Singapore dollar could further weaken.
It looks like Singapore is experiencing a second wave of coronavirus infections.
In order to slow this resurgence, Singapore sent students home, closed most workplaces, and put dormitories housing 20,000 foreign workers on lockdown.
The month-long enhanced social distancing measures, called the “circuit breaker” by authorities, could bring about more pain for a Singapore economy that’s already struggling.
This past Monday, Heng Swee Kea, the Deputy Prime Minister, acknowledged the severe disruption this would have on businesses and workers and announced a third round of support measures worth S$5.1 billion.
Named the “Solidarity Budget“, it included larger wage subsidies and foreign worker levy waivers for businesses in April, expanded scope for more self-employed people to claim income relief, as well as an S$600 cash payout for all adult Singaporeans.
This is in addition to the S$6.4 billion “Unity Budget” announced in February and the record-breaking S$48 billion “Resilience Budget“ a couple of weeks ago.
Props for throwing billions out there. But will it be enough?
Maybank Kim Eng economists Chua Hak Bin and Lee Ju Ye downgraded their full-year GDP growth forecast to -6% from -2.3%.
With 30% of the economy shut down for a month, Singapore’s economy is expected to have a deeper recession than the Global Financial Crisis in 2008, which saw the economy contract 3.1% then.
The question is how much of all this economic negativity will hurt the Singapore dollar?We shall see.
From here, if 1.4200 can’t hold as support, I think USD/SGD could fall back down its 50 SMA (blue line) and even retest 1.4000.
Why not go short then?
For me, I’m not a fan of the risk/reward ratio. If I short now, around 1.4240, I’d put my stop above the most recent swing high, say 1.4420.
That’s a loss of 180 pips (1.4420 – 1.4240).
I’d be targeting 1.4000, which would be a gain of 240 pips (1.4240 – 1.4000).
So I’d risk 180 pips to make 240 pips?
Meh. No thanks.
And that’s if I short now. It’s even a worse risk/reward if I have to wait for the 1.4200 support level to break down.
So for now, I sit on the sidelines. (And will take a mud bath in my swamp.)
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