Forex Trading Idea USD/SGD
Buy 1.3400 with a stop below 1.3270 for 1.3615 or 1.3770.
The US dollar has been on a decline against the Singapore dollar since it peaked in March 2020. The almost year long decline reached a low at 1.3162 in February 2021. In the process, a Double Bottoms chart pattern was created and we saw a confirmation of the chart pattern when price moved above 1.3386. After moving above 1.3386, there was a corrective decline to the support at 1.3386 again 4 days ago. After a successful test, price is likely to move higher to the Double Bottoms price target at 1.3617 or to 1.3770.
20EMA is rising and pointing higher with a steep slope, which is a hint of a strong bullish price trend ahead. MACD remains bullish and is also hinting of a bullish price trend ahead. Stochastic is near to the overbought zone but there is still room for Stochastic to move higher into the overbought extreme. Overall, technical indicators are hinting of a price rally ahead.
A US stimulus relief package of US$1.9 trillion proposed by US President Joe Biden was passed by Congress and sign into legalization by US President Joe Biden last week. This package will help the country and its citizens to recover from coronavirus pandemic, which has led to business failure and many of its citizens out of jobs. The US is outspending its peers to fuel economic growth. Expectations are high this pandemic relief package could get the U.S. as well as the global economy out of a pandemic induced recession. The momentum for the US economy is improving compared to many of its peers.
This massive amount of spending is also expected to lead to a rise in inflation, with bond yields already rising. US Treasury yields had risen to a 13-month high at 1.64% last week. An increase in Treasury yields is likely to support the US dollar as the US currency provides a higher return compared to many of its peers. The Singapore dollar is likely to weaken against the U.S. dollar as the US dollar is now providing a higher return compared to the Singapore dollar.
The number of coronavirus cases continues to decline in the US and sentiment has also improved as a result of a COVID-19 vaccine. A successful vaccine rollout is likely to lead to a re-opening of the US economy, which in turn could lead to more business activity that had been curtailed due to COVID-19 lockdown or restriction. Many analysts are already predicting a big growth rate for the US economy and the global economy in 2021.