USD\/SGD has lost upside momentum after briefly slipping through support at 1.2925 and printing a low of 1.2922, leaving the near-term bias neutral. Over the next 24 hours, the pair is seen consolidating, with UOB expecting trading to hold within 1.2920\u20131.2950 after an earlier call for 1.2930\u20131.2960 did not play out as the dollar dipped further.<\/p>\n
On a 1\u20133 week horizon, UOB has shifted from a positive stance to neutral following the breach of 1.2925, having previously warned on 26 Jun, with spot at 1.2965, that failure to extend gains would cap the move at the 1.2991 high logged two days earlier. The bank now frames the broader range at 1.2870\u20131.2970, while its longer-term view keeps a move above 1.3000 on the table, with scope towards 1.3095 if momentum rebuilds.<\/p>\n—\r\n\r\n
We see that USD\/SGD has lost its immediate upward drive, shifting our view to neutral for now. The pair is likely to remain confined to a tight range in the coming days, making it a good time to consider strategies that profit from low volatility. We can look at selling short-dated options to collect premium while the market consolidates.<\/p>\n
Over the next one to three weeks, we expect a broader trading range between 1.2870 and 1.2970. This is supported by last week\u2019s US Core PCE inflation data, which came in at a firm 3.1%, reinforcing the Federal Reserve\u2019s hawkish stance and putting a floor under the dollar. At the same time, Singapore’s recent non-oil domestic exports showed a surprise 1.5% contraction, which should limit any major upside for the Singapore dollar.<\/p>\n—\r\n\r\n
Despite this near-term range, our longer-term outlook still favors US dollar strength, with a potential move above 1.3000. Federal Reserve communications continue to point to a ‘higher for longer’ interest rate policy, with fed funds futures now pricing in only a small probability of a rate cut before year-end. This policy divergence should eventually push the pair higher, so we can use this consolidation period to build a long position cheaply through derivatives.<\/p>\n
This environment is ideal for using bull call spreads or calendar spreads with strike prices above the current 1.2970 resistance. Such a strategy allows us to position for the eventual breakout toward our 1.3095 target at a reduced cost, taking advantage of the lower volatility right now. We saw a similar slow grind higher during the 2022-2023 period, where patience was rewarded.<\/p>\n\n\n\n