The USD/SGD pair has been edging higher as the US Dollar strengthens across the board and risk sentiment softens. OCBC analysts Sim Moh Siong and Christopher Wong point out that the pair's daily momentum is bullish and that the Relative Strength Index (RSI) has pushed into overbought territory, signalling that buying has run a little hot. Live market data shows the 14-day RSI sitting at the overbought mark of 70, with the pair changing hands around 1.30.
Their view is that the Singapore Dollar can stay relatively resilient against its peers, but if the strong Dollar backdrop persists, USD/SGD will likely remain supported and find it harder to slip lower.
Cooler Singapore inflation eases pressure on the MAS
The latest price data came in softer than expected. In May, headline and core inflation printed at 1.8% and 1.4% year-on-year respectively, both below forecasts. They also undershot OCBC's own house view of 1.9% and 1.5% year-on-year. Firmer inflation in food along with retail and other goods was largely offset by weaker services inflation.
Domestic cost pressures are tapering off
According to the analysts, domestic cost pressures are easing. With the labour market cooling and nominal wage growth moderating from last year, services unit labour costs are likely to rise at a slower pace this year. On top of that, household spending could turn more cautious amid economic uncertainty and a higher price environment.
Less urgency to tighten at the July meeting
With core inflation undershooting expectations and global energy prices coming off, there is now seen to be less urgency for the MAS to tighten at the upcoming Monetary Policy Committee (MPC) meeting in July, provided the core inflation path keeps easing into the first half of 2027.
Technical levels and the road ahead
The analysts expect consolidation near the upper end of the range to continue for now. On the upside, resistance sits at 1.2980 (the 76.4% Fibonacci level) and 1.3030, while support lies at 1.29 (the 61.8% Fibonacci retracement of the December high to the 2026 low) and the 1.2840/50 zone (the 200-day moving average and 50% Fibonacci level).
They also caution that even though the Singapore Dollar may keep its relative strength against peers, it is not immune to higher US Treasury yields and a firmer Dollar. If the strong Dollar environment is sustained, it could keep USD/SGD supported in the interim.
