USD/IDR stays below 50-DMA ahead of Bank Indonesia rate decision

In contrast to the most currency pairs, USD/IDR fall short of portraying the US Dollar (USD) strength during the post-FOMC session while taking rounds to 14,073 during Thursday morning.

The reason could be aftershocks of the August month trade balance data from Indonesia that reported a trade surplus of $0.085 billion vs. $-0.42 billion expected and $-0.06 billion previous. The imports and exports came in at -15.60% and -9.99% respectively vs. -18.12% and -11.40% expectations and -15.21% and -5.12% respective priors.

It should also be noted that previous news of BI’s intervention to the bond market to safeguard the Indonesian Rupiah (IDR) and earlier reported upbeat Retail Sales to offer additional reasons for the pair’s recent pullback.

Markets now anticipate the Indonesian central bank to announce a third 0.25% worth of rate cut on Thursday. The Reuters affirm market expectations while saying, “analysts had predicted July’s cut was the beginning of an easing cycle to unwind the central bank’s tightening in 2018. A key factor to Thursday's decision is the rupiah’s stability, many economists have said, and the currency has lost its footing this week, weakening 1.4% since its previous peak at 13,900 per dollar on Sept. 13.”

Following the BI announcement, investors will revert to the trade/political headlines concerning the US, which has been positive off-late, while also giving importance to the second-tier housing and manufacturing data from the world’s largest economy.

Technical Analysis

A downward sloping trend-line since August 06 and 50-day simple moving average (DMA) together constitute 14,117/25 as the key near-term resistance, breaking which could trigger pair’s run-up to 200-DMA level around 14,195 and then to the monthly top surrounding 14,280. Meanwhile, September 10 low near 14,020 and monthly bottom close to 13,880 seem nearby strong support for bears to watch during further declines.