Jason Daw, Research Analyst at Societe Generale, suggests that the correction in USD-SGD affords an attractive opportunity to establish long dollar exposure within the EM currency complex as both fundamentals and techncials are supportive. Key Quotes “The pair is trading at the lower end of the six month range, is close to the 200- day moving average (1.3935) that has acted as support in the current uptrend, and is also close to trend line support (1.39) from the mid-2014 lows, while the RSI (37) points to limited short term downside. Macro-wise, growth stagnated around 2% in H2 2015 and the leading indicator points to a loss of momentum in coming quarters. Bank lending has turned negative on a year ago basis as tighter borrowing standards prevent consumers from leveraging up. Disinflationary pressures remain strong and the collapse in COE premiums and ongoing softness in rental rates should keep inflation low. Against this backdrop, the MAS should ease policy further (slope reduction or re-centering) but even if they continue to take a measured approach there is little scope for SGD NEER to trade in the upper half of the band on a sustained basis. SGD NEER is currently 90bp below the midpoint. Expression: Long USD-SGD Long USD-SGD at 1.3990 with a target of 1.45 (+3.6%; slightly above the recent high) and a stop loss of at 1.38 (-1.4%; below the 200-day moving average and trend line support). The trade has a short term tactical element and medium term macro component. Negative carry is 4bp/month and the expected holding period is 2-8 weeks. Risks: USD, GDP, CPI, technical levels Continuation of broad dollar weakness against G10 will push USD-SGD lower as would an EM FX rally. Upside surprises in revised Q4 GDP and CPI or a downside break out below key technical levels would result in our stop loss being hit.” For more information, read our latest forex news.