The USD/SGD pair rebounded this week, reaching its highest level since January 23. It continued its uptrend as geopolitical risks continued rising, pushing investors to the safety of the US dollar.
These risks escalated during the weekend when the US and Israel made a joint attack on Iran. Iran, on the other hand, has embraced a unique strategy by bombing key US bases in the Middle East. It launched drones on US embassy and the CIA office in Saudi Arabia.
Therefore, there is a risk that this will be a long war that will push more investors to safe havens. Also, the war will make it hard for the Federal Reserve to cut interest rates as Donald Trump has pushed. That’s because the price of key assets like crude oil and natural gas has continued rising this week.
Energy costs lead to higher prices over time. For example, it leads to higher transport and manufacturing prices. This is important as the recent Federal Reserve minutes showed that some Fed officials supported hiking interest rates as inflation remained above the 2% target for years.
The main catalyst for the USD/SGD pair will be the ongoing war in the Middle East and its impact on the economy. It will also react to the upcoming macro data from the United States, including the ADP jobs report on Wednesday. The Bureau of Labor Statistics will release the official jobs data on Friday.
USD/SGD Technical Analysis
The daily chart reveals that the USD/SGD pair bottomed at 1.2588 in January and reached a high of 1.2830, its highest level since January 23. It has moved above the important resistance level at 1.2700, its lowest level in July last year.
The pair has moved above the 50-day Exponential Moving Average (EMA). It also moved to the upper side of the Donchian Channels.
At the same time, the Relative Strength Index (RSI) has jumped to 60 and is still pointing upwards. The same is true with other oscillators like the MACD and the Percentage Price Oscillator (PPO) continuing to rise.
Therefore, the pair will likely continue rising as bulls target the 38.20% Fibonacci Retracement level at 1.3030. A drop below the key support level at 1.2700 will invalidate the bullish outlook.