Jakarta, CNBC Indonesia – The rupiah exchange rate strengthened 0.27% to IDR 14,970 / US $ on Monday trade (5/10/2020). The improving sentiment of market players in response to the news of the recovery in the health of US President, Donald Trump, is the support for the strengthening of the rupiah.
Investors abroad seem happy as seen from the sharp strengthening of global stock markets here. When market players’ sentiment is good, the rupiah has the potential to strengthen again in today’s trading Tuesday (6/10/2020).
Moreover, there is a high expectation that the fiscal stimulus in the US will be liquid, making market players more and more happy. As a result, the US dollar was immediately knocked out, the US dollar index fell 0.35% yesterday, and continues 0.13% this morning to 93.406. This level is the weakest since 21 September.
The US dollar took a double blow from improving sentiment from market players, as well as expectations of a liquid fiscal stimulus.
When market players’ sentiment improves, investors tend to invest in riskier assets, the US dollar which holds status safe haven to be less attractive. Meanwhile, if the fiscal stimulus in the US is liquid, the money supply will increase and the value of the US dollar will decrease.
The decline in the US dollar index opens opportunities for strong rupiah strengthening today.
Technically, the USD / IDR symbolized Rupiah is still above US $ 14,730 / US $, which is the key to this week’s movement.
The level of US $ 14,730 / US $ is a Fibonnaci Retracement of 61.8%. The Fibonnaci Retracement was pulled from the lower level on January 24 (Rp 13,565 / US $), to the intraday high on March 23 (Rp 16,620 / US $).
As long as it is stuck above it, the rupiah tends to weaken in the long term. But the good news is, the movement of the rupiah throughout last week formed a Double Top pattern. This pattern signals a reversal in direction, meaning that the rupiah has a chance to strengthen.
The stochastic indicator on the daily chart is flat and still far from the oversold territory (oversold).
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Graph: Daily Rupiah (USD / IDR) Foto: Refinitiv- – |
Stochastic is leading indicator, or indicators that initiate price movements. When Stochastic reaches the territory overbought (above 80) or oversold (below 20), then the price of an instrument has the opportunity to reverse direction.
The stochastic, which is far from the oversold area, provides room for more strengthening for the rupiah.
Rupiah is currently in the area support closest at Rp. 14,800 to 14,780 / US $. If successfully penetrated consistently, the rupiah has the opportunity to strengthen to the key level of Rp. 14,730 / US $ today.
The rupiah has the opportunity to strengthen towards Rp 14,640 / US $ this week if this key level is successfully passed.
Meanwhile, if it returns above IDR 14,800 / US $, the rupiah is at risk of weakening to IDR 14,830 / US $. If it is penetrated the rupiah could weaken to Rp. 14,970 / US $.
CNBC INDONESIA RESEARCH TEAM
(pap / pap)
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