Strategy
Sell 1.3350 for 1.3050 with a stop above 1.3550. US fiscal and monetary policy is likely to keep the US dollar week. On the chart, an important support has given way and trend is calling for a decline to the previous low of 1.3050
Technical View
Price broke an important support at 1.3440 and looks likely to test the next strong support at 1.3050. Twice in an attempt to overcome the bearish trend, the rally was capped by the 20EMA. The 20EMA is showing a very strong bearish trend. Its slope is steep which hints of a strong bearish trend. Stochastic is in the oversold zone but MACD is bearish and strong. It is likely that Stochastic is likely to stay close to the oversold zone given the strong bearish trend. Should the support at 1.3045 breaks, it is likely to confirm a Double Tops chart pattern which means price has more downside.
Fundamental View
Monetary and fiscal policy in the United States is likely to keep the US dollar weak. Coronavirus pandemic is also likely to weigh on the US dollar more than the Singapore dollar. While a COVID-19 vaccine is at hand, supply of this vaccine in the near term is unlikely to meet demand for it. In the US, coronavirus cases are still on the rise, which had led to many states imposing restrictions. This could have an adverse effect on the US economy. On the other hand, Singapore has few coronavirus cases and is now preparing for more easing of restrictions imposed at the height of the pandemic.
A massive US stimulus relief package is about to be passed by Congress. This package is to help its citizens as well as corporates cope with the coronavirus pandemic. This massive amount of money, in addition to an earlier US $5 trillion, is likely to weaken the US dollar. While fiscal policy is likely to weigh on the US dollar, monetary policy is also going to add to the weigh hanging over the US dollar. The US Federal Reserve is likely to keep US interest rate low for the next 2 years till 2022. This is likely to take away the big advantage that had kept the US dollar strong in the past few years. Beside ultra-loose monetary policy, the Federal Reserve is likely to embark on a prolong program of bond buying to keep interest rates and yields low. This is likely to keep the US dollar weak.
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