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.)
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.