Singapore Dollar Faces Consolidation Risk After Recent Rally Against US Dollar — OCBC

OCBC FX strategists Sim Moh Siong and Christopher Wong hold the latest view that USD/SGD may face consolidation in the near term after its recent decline. The US Dollar Index is currently trading near 98.90, and a modest rebound in the dollar, coupled with cautious market sentiment ahead of the US core PCE price index and the Jackson Hole symposium, has prompted some Singapore dollar longs to take profits.

**Dollar rebound and event risks cap SGD upside**

After a recent rally in the Singapore dollar against the US dollar, upward momentum has slowed. OCBC analysts note that a slight rebound in the dollar from its lows has provided some breathing room for USD/SGD. More importantly, the upcoming US core PCE data and the Jackson Hole global central bank symposium are key windows for the market to gauge the Fed's future policy path. Ahead of these major events, investors tend to square positions and stay on the sidelines, limiting room for further SGD strength and making range-bound trading more likely for the exchange rate.

**Clear short-term support and resistance levels**

From a technical perspective, the downside bias in USD/SGD has not been fully reversed. Earlier analysis from UOB also indicated that as long as the key resistance at 1.2750 is not breached, the pair's risk remains tilted to the downside, with the next target level to watch at 1.2670. OCBC's current consolidation call aligns with the prior downtrend framework established by the market, meaning the current consolidation can be viewed as a continuation pattern within the broader decline. If subsequent US economic data or Fed officials' remarks release more dovish signals, USD/SGD could resume its downtrend.

**Market focuses on Jackson Hole signals**

This week's market focus is undoubtedly on the Jackson Hole symposium. The Fed Chair's speech will be closely parsed for clues on the magnitude and pace of rate cuts. Any signal perceived as dovish by the market could weigh on the dollar and push the Singapore dollar to strengthen again; conversely, hawkish-leaning remarks could help USD/SGD test the aforementioned resistance level. Therefore, until clear signals emerge, the exchange rate maintaining a consolidation pattern is the most likely scenario.