Jakarta, CNBC Indonesia – Rupiah posted a 0.76% decline against the US dollar to Rp 14,530/US$. In 5 trading days, the rupiah was not even able to record a strengthening against the United States (US) dollar. Garuda’s currency is now at its weakest level since mid-April.
However, the story could be different earlier this week, Monday (5/7/2021). The opportunity for the rupiah to strengthen is quite large, because the US dollar index, which previously strengthened for 7 days in a row, finally fell 0.4% in trading last Friday.
The collapse of the US dollar occurred after the release of labor data, which is one of the indicators of the US central bank (The Fed) in setting monetary policy either tapering or a reduction in the value of the asset purchase program (quantitative easing/QE) and interest rate increases. Issue tapering was a depressant of the rupiah over the past week.
Last Friday, the US Labor Statistics Agency reported that throughout June there was employment outside the agricultural sector (non-farm payroll) of 850,000 people, more than Reuters’ prediction of 700,000.
Although the number of recruits was more than expected, the unemployment rate actually rose to 5.9% from 5.8% previously.
“I think the report is very good, as hiring is accelerating which is a positive sign of an economic recovery in the second half. But the data won’t make the Fed change its guidance to start tapering now,” said Angelo Kourkafas, investment strategist at Edward Jones. , as reported CNBC International, Friday (2/7/2021).
As previously noted, at the monetary policy meeting last June, the Fed changed its guidance on interest rates. The Fed indicated that interest rates could rise twice in 2023 each 25 basis points to 0.75%.
The projected rate hike is faster than the forecast given in March, where the majority saw a new interest rate hike in 2024.
In addition, there are 7 members who project interest rates could rise in 2022.
If the majority of Fed members see interest rates will rise in 2023, then tapering is likely to be carried out next year.
Bart Melek, chief commodity strategist at TD Securities, said the same thing. Melek said the delta variant of the corona virus was still a threat that could disrupt Uncle Sam’s economic recovery. Plus, vaccinations in some areas are running slowly, making the Fed to be careful in tapering or raising interest rates.
With tapering which is not expected to be carried out in the near future, the US dollar index has turned downwards, and the rupiah is likely to strengthen today.
Technically, patterns that have the opportunity to make the rupiah strengthen appeared last week. On Wednesday (30/6/2021), the rupiah formed a Shooting Star pattern, the day after that a gravestone doji pattern appeared. Both of these patterns are a signal of a reversal or reversal of the direction of the price of an asset. In this case, the US dollar weakened and the rupiah strengthened.
Meanwhile, the stochastic indicator on the daily chart is starting to enter the territory overbought.
Chart: Daily Rupiah (USD/IDR)
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.
This means that the rupiah has enough energy to strengthen.
The target for strengthening the rupiah is in the range of Rp. 14,500/US$ to Rp. 14,480/US$. If the level is passed, Garuda currency has the opportunity to reach Rp. 14,450/US$.
Meanwhile, as long as it is on hold if it goes past Rp 14,550/US$, the rupiah is at risk of weakening to Rp 14,580/US$ to the psychological level of Rp 14,600/US$.
CNBC INDONESIA RESEARCH TEAM
(pap / pap)