Singapore Dollar: Priced-in MAS move limits gains against US Dollar - OCBC

OCBC strategists anticipate the Monetary Authority of Singapore (MAS) will slightly steepen its S$NEER policy band slope on Wednesday. Given that tightening is largely priced in, the immediate reaction of the Singapore Dollar (SGD) may be limited. Although a steeper slope should bolster the SGD, persistent strength in the US Dollar (USD) and high US Treasury yields could impede gains.

On Monday, the SGD showed a modest downturn against the USD, yet this move remained contained despite the overall strength of the USD and rising US Treasury yields. With an expected slight tightening already largely priced in, the SGD's immediate response might be muted unless MAS makes a surprising move, either by making a more aggressive adjustment or holding steady. The GDP forecasts and MAS' assessment of inflation risks will also impact expectations for the policy trajectory.

Looking ahead, USD direction and US Treasury yields will likely be key influencers of USD/SGD. While a steeper S$NEER slope should offer inherent support for the SGD, sustained USD strength and high US Treasury yields could still curb gains against the USD.

The current USD/SGD rate is 1.2810. Bullish momentum is still present on the daily chart, although the Relative Strength Index (RSI) has fallen slightly. There is still a possibility of a two-way trade, as analysts will be watching for rallies to fade. Resistance levels are at 1.2820 (100 DMA) and 1.2840 (38.2% Fibonacci), while support is found at 1.2740/50 (61.8% Fibonacci retracement of 2026 low to high, 50 DMA).