Beware of the Risk of the Fall of Kyiv Could Make the Rupiah Fall!

Jakarta, CNBC Indonesia – The rupiah successfully strengthened 0.21% against the United States (US) dollar to Rp. 14,335/US$ in trading last Tuesday. Throughout the rupiah trade did not even have time to taste the red zone.

The war that occurred between Russia and Ukraine did not deter foreign investors from pouring their capital into Indonesia. The trillions of rupiahs of money returned to the country, making Garuda’s currency a mighty one.

On the stock market yesterday, foreign investors again made a net buy (net buy) more than IDR 1.6 trillion in the regular market, negotiable and cash.

As if indifferent to the war between Russia and Ukraine, foreign investors continue to buy shares in the country.

Usually, when the sentiment of market participants worsens, risky assets will be avoided. However, over the past week, foreign investors recorded a net buy of Rp 4.11 trillion in the regular, negotiable and cash markets. While in one month net buy recorded at Rp. 17.59 trillion.

It’s the same in the bond market. Data from the Directorate General of Financing and Risk Management (DJPPR) of the Ministry of Finance shows that during the last month to February 24, foreign capital inflows into the bond market were quite large, around Rp. 10.34 trillion.

If the capital inflow continues today, Wednesday (2/3), there is a chance that the rupiah will strengthen again, although it will be difficult because market sentiment is worsening again after a large convoy of Russian troops was reported to be approaching the capital city of Kyiv.

Satellite camera photo taken by US firm Maxar Technologies shows a large convoy of Russian troops heading for Kyiv. The length of the convoy is about 65 kilometers, which has sparked fears of the collapse of the Ukrainian capital.

British Deputy Prime Minister Dominic Raab said he would do everything he could to prevent the “Fall of Kyiv”. Russian troops are now rumored to be 17 miles from Kyiv, but it’s still unclear how quickly a military offensive will take place.

Technically, despite its success yesterday, the rupiah, symbolized by USD/IDR, is still above the 50-day moving average (50/MA 50) and 200 MA, thus reviving the Golden Cross pattern.

The Golden Cross is the intersection of the 50 MA average, with the 200 MA from bottom to top. The previous 50 MA has also crossed the 100 MA.

The Golden Cross can be a signal for the continued increase in USD/IDR which means the rupiah is weakening. In other words, the Golden Cross that appears is the Death Cross for the rupiah. This means that if it is stuck above the 200 MA, the rupiah is at risk of weakening in the future.

The Stochastic indicator on the daily chart started to move down after reaching the overbought area (overbought).

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.

That is, when Stochastic has not reached the territory overbought there is no signal of a reversal in the direction of the strengthening of the rupiah.

The closest support is in the range of Rp. 14,325/US$ to Rp. 14,320/US$, which is the MA 50 and 200. The rupiah needs to break through these levels to strengthen further to Rp. 14,300/US$ to Rp. 14,290/US$.

Meanwhile, as long as it is stuck above support, the rupiah is at risk of weakening to Rp. 14,360/US$ to Rp. 14,480/US$. If this level is broken, there is a risk of a weakening to Rp. 14,400/US$ to Rp. 14,410/US$.

CNBC INDONESIA RESEARCH TEAM

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