- USD/IDR keeps gradual recovery moves from June 08 low.
- Bank Indonesia is expected to announce 25 basis points (bps) of a rate cut.
- Indonesian government reduced growth forecast amid virus woes.
- Risks surrounding China and COVID-19 keep the Asian currencies pressured.
USD/IDR seesaws around 14,140, midly bid, amid the initial Indonesian session on Thursday. The pair recently benefited from the broad weakness in Asian currencies amid fears of the coronavirus (COVID-19) wave 2.0 as well as China’s political tussles with the US and India. However, traders are waiting for the Bank Indonesia’s (BI) rate decision for fresh impulse during the early-day trading.
Although the recent virus figures from mainland China and Beijing have been receding, a surge in the numbers from Texas and rising hospitalization in Florida and Oklahoma spread fears of the pandemic. It’s worth mentioning that the upbeat trial results of the UK’s second vaccine and hints of a cure by US President Donald Trump seem to fall short in beating pessimists.
Elsewhere, India and China are using media to spread indirect threats of war whereas talks in Hawaii between the US Secretary of State Mike Pompeo and China’s top diplomat Yang Jiechi also failed to offer positive results. Furthermore, the Asian Development Bank’s (ADB) pessimistic forecasts for developing Asia follow the suit of the Indonesian government’s another cut to the second quarter (Q2) prediction, to 3.1%, amid rising COVID-19 infections.
It should be noted that the market’s key risk catalysts, namely the US 10-year Treasury yields and stocks in Asia remain mostly depressed as we write. Additionally, Indonesia’s IDX Composite marks 0.13% loss as taking rounds to 4,981.50 by the press time.
Looking forward, the BI’s rate decision will be the key for the pair traders to watch. The Indonesian central bank is expected to cut the benchmark rate cut 25 basis points (bps) to 4.25% after a two-month pause in monetary policy change. In this regard, TD Securities said, “We expect a further 12.5bp rate from the CBC to 1.0%. The last cut took place in March, which was the first easing in over 4 years. While Taiwan’s economy has held up better than many of its peers, growth has slowed to its weakest in almost 4 years, and we think the intensification of external risks as highlighted in weakening export orders, will likely prompt the CBC to cut. CBC Governor Yang recently highlighted the room for further easing in comments to Taiwan’s parliament. Official growth forecasts have been downgraded to between 1.3% and 1.8% for 2020, but risks are skewed towards a weaker outcome.”
Technical analysis
Unless the pair breaks an eight-day-old ascending trend line, currently near 14,055, the quote is less likely to defy its pullback moves targeting 14,266, which comprises a two-week-old resistance line.
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