ICE Futures Singapore
Monthly Report
September 2021
Gain a deeper understanding of emerging market trends, risks and opportunities with bitcoin, FX, equity and energy markets analysis. The Research Team at Traddictiv shares their views in this monthly report, , including statistics for active or passive traders and hedgers.
MACRO COMMENTARY
Bitcoin managed to regain $50,000 in August from the July intra monthly low of $29,337 on 20th July, representing a substantial 70% move.
- U.S. regional banks have started to offer services related to crypto assets with Oklahoma-based Vast Bank (Vast), to become the first federally chartered lender, backed by the Federal Deposit Insurance Corp., to offer crypto banking. Vast offers through a mobile app access to traditional banking services alongside crypto trading and acts as a custodian for crypto assets, and offers insurance on crypto assets held with Vast provided by Coinbase.
- The U.S. Securities and Exchange Commission (SEC) Chair Gary Gensler, is looking for crypto companies to proactively register with regulators and to not take the approach of “begging for forgiveness” after launching digital asset products and services without doing so.
- The U.S. Dollar Index (USDX) closed +0.5% in August at 92.64, holding above Julys close after reaching a four-month high of 93.75 earlier on 20th August when it met with a resistance area set during October 2020. This initiated a fall to the downside setting a bearish tone for the remainder of the month only to be exacerbated by negative news with July’s poor Retail Sales figures and a significant unexpected drop in Consumer Sentiment.
- Earlier data published by the U.S. Bureau of Labor Statistics on 6th August showed Nonfarm Payrolls rose by 943,000 in July exceeding expectations and showing the greatest gain since August 2020. This positive news was reflected by the U.S. Dollar Index (USDX) rapid upward move throughout the day (0.57% gain).
- Early August also saw the Vice Chair of the Fed, Richard Clarida hinting that the conditions for an interest rate hike could be met late 2022 indicating changes early 2023. Also, there were indications that the Fed are closer to the start of tapering.
- Federal Open Market Committee (FOMC) minutes were released on 18th August with no significant surprises and after an initial reaction the U.S. Dollar Index (USDX) closed the day close to the open.
The Singapore Dollar closed the month at $1.3442 against the U.S. Dollar after taking advantage of the weakness of the U.S. Dollar declining from the highs against major currencies on 20th August 2021. The biggest movements throughout the month on the USDSGD seem to be led to the changes in the U.S. Dollar.
- Industrial production data released on 26th August 2021 by the Singapore Department for Statistics showed an increase in production of +16.3 %, this was slightly below expectations with little impact on the market.
- The Chinese Yuan Renminbi closed at $6.4532 against the U.S. Dollar after multiple retests of the lower boundaries of the range (6.4500 - 6.5100) the USDCNH had been trading in for the past 10 weeks (with the exception of 2 trading days).
- China posted a trade surplus of $56.58 billion in July of which $35.4 billion is with the United States (based on Customs data).
- Concerns raised over China’s growth expectations in the second half of the year as one of the largest exporters to China Nomura Holdings Inc. lowered its GDP forecast to 5.1% from 6.4% in the third quarter and 4.4% from 5.3% in the fourth quarter. Led by concerns over the tough stance to mitigate the Delta variant and its impact on the economy.
Technology stocks in Asia continued lower in August despite the corresponding industry in the United States setting new highs and indicated the market's concern over the Chinese government's future actions to reign in this sector.
- China has introduced regulation for increasing antitrust and personal data protection resulting in technology stocks and the broader market to experience selling pressure. Further regulatory action is expected to continue targeting loopholes that have allowed Chinese firms to raise foreign capital in overseas markets.
Brent crude oil traded lower for the first three weeks of August following July’s price action and recovered from the new low set at $64.20 to end the month 4.0% lower versus July at $71.63.
- Brent crude oil rose at the end of August as the outlook for demand expectations to increase as economic recovery builds momentum along with tight supply remained. OPEC+ will keep to agreements for production levels to increase by 400,000 barrels per day starting in August through to December.
- The oil supply shortage was expected to remain until the end of the year and reverse to be in surplus for most of 2022.
MONTHLY CHANGE
Source: Source: ICE Connect, ~30 Days
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MARKET FOCUS
U.S. DOLLAR INDEX® - DXY | SDXY
DAILY TREND: RANGE
DXY extended the upward move during the first 3 weeks of August helped by positive Jobs data rallying to make a new four-month high at 93.75. The DXY found a pocket of resistance shown on a monthly chart between 93.75 - 94.80 combined with the RSI showing the market was Overbought and the bears took over and prices fell. Subsequently we have seen a break of the short-term uptrend based on May and Julys pivot lows and a drop below the 23.6% Fib Retracement. A short-term downtrend potentially forming as the bearish outlook continued and support a distance away.
The DXY closed at 92.64 with a +0.5% change.
SINGAPORE DOLLAR - USDSGD | SGD
DAILY TREND: DOWN (USDSGD)
USDSGD during August was in sync with the movements observed in the DXY as the USD is the base in this pairing. From this we can see the Singapore Dollar had benefited from the weakness in the DXY (Dollar against a basket of currencies) after it began to fall from the 20th August highs. The USDSGD reached a resistance area on a daily chart at 1.3693 - 1.3633 on 19th August where we saw a significant drop the following day representing U.S. Dollar weakness and Singapore Dollar strength. The short-term trend is confirmed down on the USDSGD.
The USDSGD closed at 1.3442 with a -0.7% change.
UPCOMING HIGH IMPACT EVENTS
CHINESE YUAN RENMINBI - USDCNH | CNM
DAILY TREND: DOWN - NEUTRAL (USDCNH)
USDCNH spent the majority of August trading in the range it had been in for the past 10 weeks. There was a little movement on the data issued for CPI and Retail Sales for short term traders but nothing significant until 20th August. PBOC announced the interest rate decision on this day (unchanged 3.85%) this coincided with the DXY reacting from a resistance area on 20th August. The weakness in the U.S. Dollar likely led to the appreciation of CNH which as the pair has the USD as the base to challenge the support area of 6.4500. This support area had previously been tested several times and was seeing less upward movement recently and likely to break.
The USDCNH closed at 6.4532 down by -0.1%.
- Wed 1 Sep ADP Employment Change
- Fri 3 Sep Non-farm Payrolls
- Tue 14 Sep CPI
- Thr 16 Sep Retail Sales
- Wed 22 FOMC Statement
- Thr 30 Sep GDP
Source: ICE Connect, FXStreet Economic Calendar
- No major events listed
- Thr 9 Sep CPI
- Wed 15 Sep Retail Sales
- Mon 20 Sep PBOC Interest Rate Decision
- Thr 30 Sep Non–Manufacturing PMI & NBS–Manufacturing PMI
U.S. DOLLAR INDEX® CORRELATIONS
The charts identify price turning points between U.S. DOLLAR INDEX®, Brent Crude Oil (BRN) and Bitcoin (XBT) which could be used to identify periods during which prices of each of the markets appear positively or negatively correlated.
BRENT CRUDE OIL (BRN): NEGATIVE (AUGUST)
Source: ICE Connect
NYSE® BITCOIN INDEX (XBT): POSITIVE (AUGUST)
ICE ASIA TECH 30 INDEX - ICEAT30 | ATI
DAILY TREND: DOWN
Price fell for most of August on continued concerns surrounding the impact of China’s regulators draft rules focused on unfair competition on the internet and regained some ground in the closing days of the month.
BRENT CRUDE OIL - BRN | BM
DAILY TREND: DOWN
Brent price reached a new low of $64.20 on 23rd August and recovered to close at $71.63. Brent remained inversely correlated to the U.S. Dollar.
UPCOMING HIGH IMPACT EVENTS
NYSE BITCOIN INDEX® - XBT | BMC
DAILY TREND: UP
Bitcoin reached $50,000 in August and managed to hold under that key level at the close of the month.
- Thr 9 Sep China CPI (Aug)
- Mon 20 Sep PBOC Interest Rate Decision
- Thr 30 Sep China Non-Manufacturing PMI
Source: ICE Connect, FXStreet Economic Calendar
- OPEC+ countries maintains its outlook to increase supply of oil in August by 400,000 barrels per day through to December
ICE ASIA TECH 30 INDEX CORRELATIONS
The charts identify price turning points between the ICE Asia Tech 30 Index, South Korea’s KOSPI Composite Index (KOSPI) and Thailand’s SET Index (SET) which could be used to identify periods during which prices of each of the markets appear positively or negatively correlated.
KOSPI COMPOSITE INDEX (KOSPI): POSITIVE
Source: ICE Connect
THAILAND SET INDEX (SET): POSITIVE
PRODUCT HIGHLIGHT: MINI BRENT CRUDE FUTURES
KEY ATTRIBUTES
Mini Brent Crude Futures contract with contract size of 100 barrels is cash-settled based on the ICE Futures Europe Brent Crude Futures contract which has a contract size of 1,000 barrels. The reduced product size allows clients to optimize their capital exposure allocation and flexibility to utilize financial leverage across multiple products giving portfolio diversification opportunities to the client.
TECHNICALS (DAILY)
Spot FX US Dollar / Singapore Dollar (USD/SGD) price fell which indicated Singapore Dollar (SGD) strength from 20th August high 1.3655 at the upper Bollinger Band ® to the close of the month 1.3447 below the lower Bollinger Band® and oversold conditions on the Stochastics.
Source: ICE Connect
MONTHLY EDUCATIONAL BITES
Terminology and concepts of the financial markets and futures.
| What is liquidity and what is its significance? |
Liquidity refers to the availability of a product and ensures market participants have the ability to buy and sell easily.
A liquid market increases the likelihood for finding a counterparty when entering or exiting a trade. |
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| What is volume a measurement of in trading? |
Volume in trading refers to the total number of contracts exchanged between buyers and sellers of a market during trading hours over a given period.
Higher trading volumes are considered more positive than lower trading volumes because they indicate the availability of orders in the market allowing better order execution during the trading session. |
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| What is open interest in the derivatives market? |
Open interest is the total number of outstanding derivative contracts, such as options or futures that have not been settled for an asset.
Open interest equals the total number of bought or sold contracts, not the total of both added together. Increasing open interest represents new or additional money coming into the market while decreasing open interest indicates money flowing out of the market. |
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Educational resources are available and provided by Traddictiv.
RISKS AND OPPORTUNITIES FOR CORPORATES AND INDIVIDUAL INVESTORS
Common application of financial market instruments for managing risk and opportunities.
Position and Risk Management
Risk management is the responsibility of market participants designed to limit risk exposures that specifically applies to the participants financial profile in the market.
The financial profile of a participant may include their role in the financial market or the amount of capital under their responsibility to be managed in the market, and therefore the risk variables that each would need to identify may be unique.
For both corporate and individual investors, the market to trade would be a key variable to clearly state and support with reasons for trading or investing. Reasons for selecting one market over another could include price volatility, liquidity, daily volume traded, size of the minimum price increment, and value of the minimum price increment. Comparing these variables between markets will help decide the suitability and/or risk of each.
For example, if bitcoin (BTC) moves around 1,000 points per day and each point is worth $1, a trader might experience a $1,000 fluctuation in their account balance for one day. Another example is the U.S Dollar / Singapore Dollar (USDSGD), which could move 70 pips or more per day and trading a standard lot size with each pip worth $10, a $700 fluctuation could be expected for one day.
Market participants may also manage their risk through the size of their positions. The larger their position size, the greater is their exposure and the smaller their position size their exposure is lower. Investors should determine the risk that would result from various position sizes and select the size that ensures that their risk limit is not exceeded.
Finally, setting stops with a specified loss amount provides protection if the market does not move in the desired direction. It helps to prevent creating a loss scenario which is larger than an account can handle.
Limitations
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To retail investors: Futures contracts based on bitcoin may pose specific risks. Such risks may arise from greater volatility in prices resulting from a range of factors. Those risks could in turn affect financial outcomes associated with maintaining required margins or any losses at final contract settlement.
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