Jakarta, CNBC Indonesia – The rupiah weakened slightly by 0.07% against the United States (US) dollar to Rp 14,220/US$ last Tuesday. The pressure on the rupiah will be even greater in today’s trading, Wednesday (17/11), because the US dollar index shot up last Tuesday.
The index that measures the strength of the US dollar yesterday rose 0.52% to 95.92, which was the highest level since July 2020. The reason was higher-than-expected US retail sales data.
The US Commerce Department reported that retail sales in October grew by 1.7%, much higher than the previous month’s 0.8% and higher than the Dow Jones’ expectations of 1.5%.
Meanwhile, core retail sales which exclude the automotive sector also grew 1.7%, higher than the previous month’s 0.7%, and expectations of 1%.
The retail sales data shows that the US economy is still on a recovery path, amidst high inflation. So the risk of stagflation is minimal.
Meanwhile, domestically, the market is currently waiting for the announcement of the monetary policy of Bank Indonesia (BI) on Thursday (18/11). The results of a Reuters poll showed BI is expected to hold interest rates until the end of next year, and continue to pay attention to the direction of the Fed’s monetary policy.
Since the coronavirus disease (Covid-19) pandemic hit, BI has cut interest rates by 150 basis points to 3.5%, which is a record low in history.
With low inflation and the exchange rate of the rupiah which tends to be stable despite the tapering of the Fed, the pressure for BI to raise interest rates can be said to be nil.
Low interest rates are still needed to help the Indonesian economy bounce back after slowing down in the third quarter of 2021.
However, on the other hand, the high inflation that hit the United States made the market view that the Fed will aggressively raise interest rates next year, which is 3 times.
If that happens, the rupiah is at risk of being depressed because the difference in yields (yield) will be narrower. So the market will wait for instructions from BI how to respond to changes in the Fed’s policy.
Technically, the pressure on the rupiah is getting bigger after yesterday’s weakening and ended trading above the Hammer pattern formed on Monday (15/11), which is a sign of an increase.
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Chart: Daily Rupiah (USD/IDR) Foto: Refinitiv- – |
In addition, the rupiah is now restrained by the 50-day moving average (50/MA 50 moving average) at around Rp 14,220/US$. This level could be the key to the movement of the rupiah today.
In addition, the Stochastic indicator on the daily chart is moving down but has not yet reached the oversold area (oversold).
Stochastic is leading indicator, or indicators that initiate price movements. When Stochastic reaches the territory overbought (above 80) or oversold (below 20), then the price of an instrument has the opportunity to reverse direction.
That is, when USD/IDR reaches oversold, then it is likely to reverse up, meaning that the rupiah is at risk of correction. This means that there is no pressure on the rupiah from the Stochastic indicator.
As mentioned earlier, the 50 MA area could be a key move. As long as it stays below it, the rupiah has the opportunity to strengthen again to Rp. 14,200/US$. A break below this level will bring the rupiah towards Rp 14,180/US$.
Meanwhile, if the MA 50 in the range of Rp. 14,220/US$ is passed, the rupiah is at risk of weakening to Rp. 14,250/US$, closing the gap. gap formed last Monday. If this level is also passed, the rupiah is at risk of further weakening.
CNBC INDONESIA RESEARCH TEAM
(pap / pap)
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