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FX Watch: USD/SGD back at trendline support, EUR/GBP struggles at resistance


The US dollar has been losing steam lately, with sentiments still reeling in from weaker-than-expected US labour conditions to end last week. Softer labour conditions were seen boosting the case for an earlier Federal Reserve (Fed)’s easing process, as market expectations leaned more firmly to a September rate cut at a 77% probability (from the 50% last month). The US unemployment rate for June was seen edging up to 4.1%, which overshot the Fed’s recent projections of 4% for 2024 and could likely be met with more dovish views from policymakers ahead.

USD/SGD back to retest trendline support

The weaker US dollar has dragged the USD/SGD back to a key trendline support at the 1.348 level, which buyers attempted to defend overnight. That said, with its daily relative strength index (RSI) dipping back below its mid-line, it may have to take more conviction to overturn recent downward bias. Seasonality for the US dollar in July tends to lean towards a seasonal decline as well, while any validation for impending rate cuts from US policymakers ahead could remain a key headwind.

Any breakdown of the key upward trendline support may suggest sellers in greater control, which may leave the 1.344 level on watch next, followed by the 1.336 level. On the upside, any bounce may likely face heavy resistance at the 1.357 level, which the pair failed to overcome on two previous occasions over the past two weeks.

EUR/GBP struggles at resistance

The second round of the French parliamentary elections concluded with a shock to markets, with no political group making up an absolute majority and raising the odds for a political paralysis with a divided government.

Initial dip in the euro was met with some recovery however, potentially with expectations that more clarity may be offered ahead with some form of coalition. One may also note that political factors tend to carry shorter-term impact, with markets likely to increasingly shift its focus on economic prospects to drive greater moves.

That said, having broken below a broad descending triangle pattern, more conviction may still be needed to reverse the downward bias in the EUR/GBP. Its daily RSI struggled to cross back above the mid-line for now, while resistance is presented at the 0.850 level which marked a previous support-turned-resistance. On the downside, the 0.839 level may be on watch as immediate support to hold, where its June bottom stands.

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