USD/SGD fell to 1.2667 last Friday after reports of a conditional reopening of the Strait of Hormuz. It then rebounded sharply in early trade after Iran reclosed the strait over the weekend.
Market attention is on whether a deal is reached or whether there is further military escalation in the next 24–48 hours. The daily chart still shows bearish momentum, but there are early signs it may be easing.
RSI is turning up from near oversold levels. Support is seen at 1.2700 and 1.2670, with 1.2670 marked as the 76.4% Fibonacci level.
Resistance is located at 1.2750/60, linked to the 50-day moving average and the 50% Fibonacci level. Further resistance levels are 1.2800, tied to the 21- and 100-day moving averages and the 38.2% Fibonacci retracement of the 2026 low to high, and 1.2850, aligned with the 200-day moving average and the 23.6% Fibonacci level.
The recent reclosure of the Strait of Hormuz has caused a sharp rebound in USD/SGD, reversing last week’s dip and highlighting the market’s sensitivity to geopolitical risk. This sudden flight to safety underscores the US dollar’s role as a haven, creating immediate opportunities in the options market. We should anticipate heightened volatility in the coming days as the situation develops.
This event is significant because the Strait is a critical artery for global energy; data from last year showed that over 20% of the world’s daily oil consumption transits through this narrow passageway. A sustained closure could easily push Brent crude past the $100 per barrel mark, feeding into the global inflation concerns we have been monitoring. This makes the Singapore dollar, the currency of a trade-reliant and energy-importing nation, particularly vulnerable.
The broader market sentiment has already shifted, with the VIX, a key measure of fear, jumping above 25 in recent trading sessions. This risk-off environment generally benefits the US dollar as investors seek liquidity and safety. For Singapore, this external shock complicates the outlook for inflation and economic growth that the Monetary Authority of Singapore has been trying to balance.
From a technical standpoint, the rebound from near oversold conditions suggests the previous downward trend in USD/SGD may be exhausted. This shift makes buying call options an interesting strategy for those who believe tensions will escalate further, as implied volatility is likely to rise, increasing option premiums. The key resistance levels to watch are 1.2760 and the more significant 1.2800 zone.
Derivative traders face a clear binary event over the next 48 hours. A diplomatic breakthrough could send the pair tumbling back toward the 1.2670 support level, rewarding put option holders. However, any sign of military action would almost certainly propel the pair through near-term resistance, targeting the 1.2850 mark.
We can look at the market’s reaction during similar tensions in 2019, when fears of a disruption caused a sharp, albeit temporary, spike in oil and a rush into the US dollar. That historical precedent from several years ago suggests these initial moves can be powerful and fast. Therefore, hedging existing Singapore dollar exposures with derivatives should be a primary consideration for any portfolio with exposure to the region.
