Introducing USDSGD
The USDSGD is a currency pair made up of the US dollar and the Singapore dollar. The US dollar, abbreviated as USD, is the country’s official currency. The Singapore dollar, abbreviated SGD, is the country’s official currency. They come together to form the currency pair USDSGD. This currency pair is deemed exotic since Singapore is still viewed as a developing country and is paired with the US. It is also among the forex market’s most popular exotic forex pairs. The USDSGD currency pair is quite popular since both currencies are highly correlated. The USDSGD has high interest yields making it great for the purpose of carry trading.
The United States Dollar
Although the presentation of the dollar is not needed, it would be inconsiderate not to do so. The US dollar, abbreviated as USD, is the most actively traded currency in the world. It is the most widely used currency and is frequently used as a reference currency for all monetary evaluations. The Federal Reserve Bank, or “Feds,” as they are more often known, issues this money.
The first paper dollar was made in 1862 after they ran out of coinage to pay for the Civil War. The USD is now extensively recognized as a form of payment in many financial markets worldwide. In order to better relations with this big powerhouse, several nations have changed their currencies to become dollars as well. New Zealand, Canada, and Australia are among these countries. Because the US dollar is the most commonly used currency in the world, it is affected by any big economic event that occurs anywhere around the globe.
The Singapore Dollar
The Singapore dollar goes by SGD in the forex space. It is the national currency of Singapore. The Singapore dollar has ties to the Spanish dollar from as early as the 16th or 19th century. It is among the most popular currencies in Asia. This valuable currency is issued by the Monetary Authority of Singapore. Over the years, the quality and markings on the Singapore notes have significantly changed in order to become more secure and harder to replicate to prevent fraud. The Singapore notes are known for being quite vibrant in color and rich in history as it displays some of the most important historic sites.
Why Trade USDSGD
The USDSGD is one of the most popular exotic currency pairs in the forex industry. They are quite popular due to the unique market conditions they present to traders. Here is why you should trade the USDSGD:
Exotic Currency Pair
The USDSGD is an exotic currency pair. An exotic currency pair refers to a pair that contains the currency of the US as well as the currency of a developing country. The United States is paired with Singapore in this scenario to form the USDSGD currency pair. An exotic currency pair brings unique trading conditions to the forex space. Major and minor currency pair market movements can get quite boring to watch all the time. Trading exotic currency pairs is how traders spice up their trading routine. The USDSGD is among the most popular exotic currency pairs on the market and are quite interesting to trade as well.
Interest Rates
Singapore is known for its high interest rates provided by the Monetary Authority of Singapore. These high interest rates are even greater than some of the market leaders such as the U.S., U.K., or even Japan. Due to these high interest rates, traders are attracted to the USDSGD currency pair due to its high interest yields. The reason this pair has high yields is due to the fact that their interest rates have a great difference between them. The USD has significantly lower interest rates than Singapore. Due to these high yields, a carry trade is the popular move used by traders when trading this currency pair. Carry trading refers to selling a currency with a low interest rate to buy one with a higher interest rate.
Market Volatility
The USDSGD is an exotic currency pair. Due to this reason, it faces quite different market conditions than most of the other currency pairs. The USDSGD enjoys very steady market conditions most of the time. This is mostly due to Singapore not having many major economic events. It does, however, exhibit instability on occasion when a major event does eventually happen. The great part is that these moments of volatility are extremely predictable. This indicates that experts are already ahead of the dynamic duo and can predict when this currency pair will exhibit volatile market circumstances. As a result, the USDSGD is quite popular among scalpers, who take advantage of these periods of volatility to make a fast profit.
USDSGD Trading Tips
As discussed above, the USDSGD presents some unique market conditions which make most traders eager to trade this pair. But unique market conditions also need some great trading strategies in order to trade successfully. Here are some top tips for trading USDSGD:
Pullback Trading
Pullback trading occurs when the market temporarily deviates from its trend, allowing you to enter the market at a low cost. When trading a pullback, you must first determine when the market will pull back. If USDSGD is in an uptrend and momentarily breaks and falls little, you have a chance to join the market at a reasonable price with a BUY transaction. Similarly, if the market is in a downtrend and temporarily breaks and climbs significantly, you have an opportunity to enter the market via a SELL trade at a decent price. As a result, this is a basic yet successful approach for the USDSGD currency pair.
Range Trading
Range trading is when you use support and resistance levels to determine when to enter a trade. The highest points in a particular chart are the resistance levels. Similarly, the support levels in a particular chart are the lowest points. Understanding the location of these highs and lows is critical to the range trading approach. For example, if the price is reaching a resistance level and you feel it will hold, you might enter into a SELL transaction. If, on the other hand, the price is approaching a support level that you feel will hold, you may perform a BUY transaction. If the price continues to fall below support, you can enter a short position because the support level will no longer be valid. Similarly, if the price continues to rise over the resistance level, you may go long because the resistance level will no longer be valid.
Carry Trading
Trend trading is the use of market movement patterns to determine when to place the order. Trends are easily noticeable, especially when looking over longer durations. The most typical patterns to watch for are when the market moves steadily higher or even downwards. An upward trend may be observed when the highs are rising and the lows are rising as well. Similarly, a downward trend may be observed when the highs are falling and the lows are falling as well. As a result, you may spot trend patterns in USDSGD and hence do trend trading in this manner.
Factors Affecting USDSGD
Since the USDSGD currency pair contains the USD it has quite a lot of factors that could impact its trading conditions. But since it also contains the SGD, it is an exotic pair that has a low trading volume. Here are the top factors impacting the USDSGD:
The Aerospace Industry
The United States is a major manufacturer and exporter of planes and their parts. As a result, its economy is heavily reliant on the export of these items in order to prosper and grow in value. Any changes in the aircraft market, like as demand or prices, will have an immediate influence on the USDSGD pair. If demand for planes rises, the United States will export them more frequently, causing the USDSGD to appreciate in value. If demand falls, the US suffers since it will be unable to export as much, causing the USDSGD to fall in value.
The Plastics Industry
Singapore is among the largest producers and exporters of valuable commodities such as plastic products. Therefore their economy greatly depends on the export of these plastic products in order to thrive and increase in value. Any changes to the market for these commodities such as demand or prices will have a direct impact on the USDSGD pair. If the demand for plastic increases, Singapore will export them more often, and therefore, USDSGD will decrease in value. If the demand for plastic decreases, Singapore will suffer as they wouldn’t be able to export them as much, and therefore, USDSGD will increase in value.
Interest Rates
Interest rates have a huge impact on the USDSGD currency pair. If the United States decides to increase its interest rates, the USD will suffer and will face a drop in value.
This would cause the USDSGD to also drop in value. However, if Singapore decides to increase its interest rates, the SGD will suffer and will face a drop in value. This would cause the USDSGD currency pair to appreciate.
The Petroleum Industry
Singapore is among the largest producers and exporters of valuable commodities such as crude oil and its derivatives. Therefore their economy greatly depends on the export of these petroleum products in order to thrive and increase in value. Any changes to the market for these commodities such as demand or prices will have a direct impact on the USDSGD pair.
If the demand for crude oil increases, Singapore will export them more often, and therefore, USDSGD will decrease in value. If the demand for petroleum decreases, Singapore will suffer as they wouldn’t be able to export them as much, and therefore, USDSGD will increase in value.
The Ships Industry
The United States is a major manufacturer and exporter of boats, ships, and ship parts. As a result, its economy is heavily reliant on the export of these important goods in order to exist and grow in value. Any changes in the market for these items, such as changes in demand or prices, will have an immediate influence on the USDSGD pair. If the demand for ships rises, the United States will export them more frequently, causing the USDSGD to appreciate in value. If demand for boats falls, the US would suffer since it will be unable to export as many, causing the USDSGD to fall in value.
The Chemicals Industry
Singapore is among the largest producers and exporters of valuable commodities such as chemicals and its derivatives. Therefore their economy greatly depends on the export of these chemical products in order to thrive and increase in value. Any changes to the market for these commodities such as demand or prices will have a direct impact on the USDSGD pair. If the demand for chemicals increases, Singapore will export them more often, and therefore, USDSGD will decrease in value. If the demand for chemicals decreases, Singapore will suffer as they wouldn’t be able to export them as much, and therefore, USDSGD will increase in value.
Financial Institutions
Both the Federal Reserve Bank and the Monetary Authority of Singapore are majorly responsible for any instability in the USDSGD marketplace. The FRB and MAS release monthly reports and statements regarding updates to any policy changes. These reports also display the economic and monetary forecasts for the upcoming short-term.
Any positive results from the FRB will have a positive impact on the USDSGD currency pair. However, any positive results from the MAS will have an inverse impact on the USDSGD currency pair. The representatives of these individual banks also hold speeches frequently where they explain these results in more detail. These speeches are just, if not more, important in determining the direction of the USDSGD market. From FRB, Jerome Powell who is the Chairman of the institution is highly looked upon for his speeches. From MAS, Eddie Yue who is the Chief Executive of the institution is highly looked upon for his speeches.
Gross Domestic Product
GDP, or Gross Domestic Product, is a measure of a country’s overall economic performance. It has a substantial impact on the USDSGD pair’s volatility. A positive GDP statistic shows that the economy is thriving. This, in turn, would encourage investors to invest in the country’s economy, raising the value of the country’s currency. If the US has a good GDP, the US Dollar will appreciate, prompting the USDSGD to appreciate as well. In the case of the Turkish lira, however, the opposite is true. If Singapore’s GDP was positive, the TRY would appreciate, leading the USDSGD to decline in value.