MAS unexpectedly tighten and what comes next for the China A50

The central bank of Singapore, The Monetary Authority of Singapore (MAS) unexpectedly tightened its monetary policy settings today, to “ensure price stability over the medium term” amid higher inflation.

At its biannual meeting, the MAS said it would raise the slope of its currency band slightly from zero previously while maintaining the width of the currency band at which it is centred.

The currency is a primary tool of MAS monetary policy. Increasing the slope of the band has allowed the currency to appreciate, thereby reducing the price of imports and easing inflationary pressures.

Of the thirteen economists polled by Reuters ahead of the event, eleven predicted that the central bank would keep its monetary settings on hold.

After the announcement, USDSGD fell -0.30% to 1.3475, although it has since recovered to be back trading near 1.3500 at the time of writing.

Turning now to the China A50. JP Morgan this week downgraded China's growth to 8.3% in 2021 and 5.2% in 2022, based on a property sector slowdown and production constraints to meet energy targets. Despite this, the China A50 has made good gains since our last update.

As noted last week, the China A50 tested and held the August 14516 low during the commotion of the Evergrande incident during September, providing preliminary evidence of basing.

The index has since broken above downtrend resistance at 15650, coming from the February 20688 high and horizontal resistance from the September 15715 high. This development indicates that a multi-month correction is complete at the 14,516 low and sets up a test of resistance, formerly support at 16,500/17,000.


We would stay with the positive view unless the China A50 was to fall back below support 15,600.


China A50 Daily chart

Source Tradingview. The figures stated areas of October 14th, 2021. Past performance is not a reliable indicator of future performance.  This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation

Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

Open an Account