The USD/SGD exchange rate continued its downward trend as the US dollar weakness gained steam. It was trading at 1.2670, down sharply from last year’s high of 1.3750. It is hovering at its lowest level since September 2024.
Singapore Dollar Emerges as a Safe-Haven Asset
The USD/SGD pair has remained under pressure in the past few months as the Singapore dollar has emerged as a safe-haven asset. Singapore, like Switzerland, is a neutral country with a strong economy.
Geopolitical risks have continued rising in the past few months. The most notable one is the ongoing military buildup in the Middle East. Donald Trump has deployed the biggest military power in the region in over decades.
There is a risk that he will attack Iran as soon as this week. Such a move would lead to higher crude oil prices as Iran has warned that it will shut the Strait of Hormuz.
While Trump has said that he supports a limited strike, Iran has warned that it will respond with all its might. In a statement last week, Ayatollah Khamenei warned that the military would sink a US aircraft carrier.
Singapore’s economy has done well in the past few months. The unemployment rate remained unchanged at 1.9%, while consumer inflation has remained below 2%. The most recent data showed that the annual inflation rose 1.4% in January from 1.2% in the previous month.
More data showed that Singapore’s exports soared in January, reaching over SGD 75 billion in January from SGD 64 billion in December last year. Imports rose to over SGD 64 billion in the previous 59 billion.
USD/SGD Technical Analysis
The weekly timeframe chart shows that the USD/SGD pair has been in a strong downtrend in the past few months. It dropped below the key support level at 1.2700, its lowest level in July last year. This retreat invalidated the double-bottom pattern, which is a bullish sign.
The pair remains below all moving averages and is now forming a bearish flag pattern. Also, the Percentage Price Oscillator (PPO) continued falling.
Therefore, the most likely scenario is where the pair continues falling, potentially to the key support at 1.2500. A move above the key resistance level at 1.2700 will invalidate the bearish outlook.