USD/IDR shrugs off flooding in Jakarta as traders await Indonesia Inflation

USD/IDR stays on the back foot while taking rounds to 13,875 during early Thursday. Traders are less responsive to the news of flooding in Jakarta amid overall risk on in Asia. Even so, monthly inflation data is awaited for near-term direction.

Bloomberg describes the present conditions in Indonesia as the worst in seven years while relying on the state-run electricity company’s update. The news says, “the rains submerged homes and cars and shut one of Jakarta’s airports. More than 700 areas in greater Jakarta region suffered from power outages and commuter trains suspended some operations.”

Even so, Asian traders are cheering the US-China trade optimism after the US President Donald Trump confirmed the signing of the phase-one deal on January 15 and talks on phase-two during his China visit afterward.

It can also be said that the traders are waiting for the key inflation data ahead of reacting to the geopolitical headlines coming from Indonesia. The Inflation numbers for December are still to be rolled out and will be the key to determine the Bank Indonesia’s (BI) next move after it announced multiple rate cuts in 2019. The headline inflation is likely to decline to 2.9% from 3.0% on a yearly basis while Core Inflation may increase to 3.11% from 3.08% YoY.

After the recent “no policy change” decision by the BI, the Australia and New Zealand Banking Group (ANZ) keep its hope of further rate cuts while saying, “BI’s policy messaging continued to signal an easing bias, and domestic growth and inflation dynamics support the case for more easing. However, external stability remains a constraint for aggressive rate cuts, in our view. Overall, we maintain our forecast for one more 25bp rate cut in the current easing cycle, likely in Q1.”

Technical Analysis

Unless breaking a 200-day SMA level of 14,140 on a daily closing basis, buyers are less likely to be pleased.