The downtrend continues - over the past month it has only become more intense because in addition to slowing economic growth, the unstable political situation in Spain and Italy exerted pressure on the euro, therefore the probability of a tightening of the ECB's monetary policy has decreased.
However, this week the situation has changed. The political situation in Italy and Spain has stabilized. New governments were formed in both countries and the possibility of re-election in Italy passed. In addition, the euro was supported by the statements of the ECB's chief economist, who said that the ECB management has confidence in achieving the target level of inflation in the eurozone, which allows them to consider the curtailment of the financial stimulus program. Thus, next week's ECB meeting will be decisive regarding the question of ending the asset purchase program. Earlier it was supposed that the ECB will cautiously wait to see how the situation in Italy and Spain would unfold. As for economic statistics, the data about the eurozone's GDP matches the expectations on the market, which also does not prevent the ECB in their plans to tighten monetary policy.
The Singapore dollar retreated from its previous positions due to the strengthening of the euro. The weakening of the SGD stopped a few days ago amid recent data about the Nikkei PMI business activity index in the private sector, which reached a record level of 56.8 points in May. Production volumes have grown at the highest rate for the last 4 years while the number of new orders increased at the strongest pace in five years. Next week the SGD may also get support with the release of new data on retail sales and unemployment. Also, next week we can expect an increase in volatility on Thursday due to an upcoming ECB meeting.
At the moment the MACD and the Stochastic oscillators signal the efficiency of short deals on the trend. Such deals can be considered as optimal in the short term, but in the medium term, starting from Thursday, the situation may change, in the case of the ECB's final decision on the curtailment of the stimulus program. There is a probability of the resistance line shifting to the previously set level of 1.58-1.59 SGD.
