USD/IDR drops to five-week low ahead of Bank Indonesia rate decision

• USD/IDR extends one-week-old declines to mid-September lows.
• Traders seem to prepare for BI’s rate cut amid overall USD weakness.
• A heavy economic calendar from the US side, coupled with trade/Brexit news will entertain markets.

Even after witnessing global criticism for the new cabinet, coupled with an expected rate cut from BI, the USD/IDR drops to a multi-week low while 13,971 as a quote during early Thursday.

Indonesia’s new cabinet gained major attention as it includes the President’s rival and an accused over several crimes. However, this seems to have given a sense of political stability to the Asian nation and could well be witnessed by today’s Indonesian Rupiah (IDR) strength.

Elsewhere, Indonesia’s Ministry of Energy & Mineral Resources (ESDM) has confirmed the earlier-than-scheduled timing for the ban of nickel ore exports, which in turn could help shrink the country’s current account deficit as per the UOB Group’s Economist E.Tanuwidjaja.

Additionally, the overall weakness of the US Dollar (USD) on the back of recently downbeat data could also be considered as a reason for the pair’s latest declines.

Investors will now focus on rate decision from the Bank Indonesia (BI). According to 23 of the 30 economists surveyed by Bloomberg, the BI is expected to reduce its key rate by 25 basis points to 5% on Thursday. Odds for the Asian central bank’s fourth consecutive rate cut rose after the BI’s Deputy Governor Dody Budi Waluyo’s comments during the last week and the International Monetary Fund’s (IMF) pessimistic growth forecast for 2019.

Following the BI decision, investors will keep an eye over the global economic calendar carrying many key events like activity numbers from the Eurozone, Germany and the United States (US). Though, today’s main event will be European Central Bank (ECB) monetary policy meeting as it’s the last for Mario Draghi as President.

Technical Analysis

An upward sloping trend-line since June, around 14,948 grabs immediate market attention as a break of which will recall 13,880. On the upside, 14,100 and 200-day Exponential Moving Average (EMA) level of 14,193 will keep prices in check.