FX Watch: AUD/SGD in wedge formation, EUR/USD nearing trendline support

Overview

There were not much moves around Wall Street overnight, with markets generally in some wait-and-see amid a light economic front, which led attention to focus on upcoming corporate earnings. Traction remains around the US dollar, which powered on to a near two-month high, having now gained close to 4% since the start of the month. Expectations for a more inflationary environment with rising odds of a Trump presidency have been a key driver of its recent stellar feat, alongside surging Treasury yields on a potentially higher fiscal spending.

But with much having been priced for now, the question is whether we will see some sell-the-news post-election, given that policies tend to take time to pass, and any split-government scenario or a Kamala presidency will be a trigger for unwinding in the US dollar. But until then, we may expect the US dollar to stay supported in the near term amid election uncertainties.

Ahead, Tesla’s earnings will be in the spotlight. Key areas of interest include the potential impact of price cuts on profitability and the outlook for vehicle deliveries for the rest of the year and into 2025. Any updates on its full self-driving technology and its Robotaxi project will be welcomed as well.

AUD/SGD: Attempt to bounce off lower wedge trendline

The AUD/SGD is attempting to stay supported at a lower wedge trendline around the 0.8750 level, with a near-term higher-lows formation indicating buyers holding up for now. A lot of anticipation is still in place for further clarity on China’s fiscal stimulus, which we believe may only come after the US elections. Until then, reservations remain on the success of recent monetary support, given that a series of interest rate cuts and reserve requirement ratio (RRR) cuts has previously been met with limited success.

Any breakdown below the support confluence at the 0.8732 level could suggest a greater shift in sentiments to the bearish end, which could pave the way towards the 0.8710 level next. For now, trading within the wedge pattern may leave buyers to eye the 0.8916 level for a potential retest.

EUR/USD: Heading towards upward trendline support

The US dollar strength has weighed heavily on the EUR/USD, with the pair retracing close to 3.8% since the start of the month. That said, buyers may potentially eye an upward trendline support at the 1.076 level for a near-term bounce, while daily oversold technical conditions may also call for some moderation. The upward trendline has been supporting a series of higher lows since October 2023 and may be crucial for the broader upward trend to hold.

Any bounce from the 1.076 level may leave the 1.093 level on watch as a potential target. On the other hand, failure for the trendline support to hold may point to strong control from sellers, which could leave the 1.066 level in sight next.