We recommend selling USDSGD at 1.31 with a take profit target of 1.264 and stop loss at 1.323.
We look for this trade recommendation to materialise over the next few weeks. USDSGD will fall due to our counter-consensus view on this weeks’ MAS monetary policy meeting and potential upside surprises to macro data releases in Asia.
In our view, the MAS monetary policy statement this week will maintain the current stance of monetary policy with a risk that a widening of the policy band materialises.
Our view deviates significantly from the consensus view, which indicates that the MAS may move to a neutral policy stance.
We believe the MAS is not assuming a recession in the G3 economies and the baseline assumptions maybe of slow growth with uncertainties on the horizon.
In our assessment, the MAS doesn’t expect sovereign risks in Europe and the US to become unmanageable in the next 1-3 quarters.
In addition, we doubt that the MAS is expecting downside risks to financial markets to materially rise in the next 1-3 quarters.
We expect our model of the MAS S$ NEER to indicate a rise over the next few weeks from the October 7, 2011 print of 112.89 and September 30 low of 112.30.
Our S$ NEER model has a 97% correlation with the MAS S$ NEER.
On the macro front, as we have been highlighting for Asia in numerous reports, economic activity in Singapore has bottomed and is already on the way up.
Inflation risks in Singapore remain and the momentum will accelerate starting from the November CPI data point and into Q1 12 in our view.
Click here to read the full report:
http://www.easyforexnews.net/wp-content/uploads/2011/10/AsiaStrategyFocusSinaporempcOctober2011.pdf
Skandinaviska Enskilda Banken AB