Search ForexCrunch
  • USD/IDR extends the previous day’s pullback from three-month high.
  • Broad US dollar weakness, risk-on in Asia combat geopolitical, virus woes at home.
  • Bank Indonesia is widely anticipated to stand pat on monetary policy.

USD/IDR stays depressed for the second day in a row, down 0.20%, while declining to 14,757 ahead of Wednesday’s European session. The pair took a U-turn from multi-day high the previous day as Indonesian trade figures flashed upbeat outcomes for July. However, the bears are cautious ahead of the Bank Indonesia Rate decision.

In doing so, the cross pays a little heed to the magnitude 6.8 earthquake at home while taking clues from the broad optimism in Asia. The reason could be traced from the increased hopes of further American stimulus to combat the coronavirus (COVID-19) after House Speaker Nancy Pelosi showed readiness to cut the Democratic bid in half.

Also contributing to the pair’s strength could be the biggest trade surplus in nine years and higher exports for three consecutive years published the previous day. Furthermore, wide expectations that the BI will keep the rates unchanged considering the latest weakness in the Indonesian rupiah (IDR), as well as rising hopes of Chinese recovery, also weigh on the USD/IDR prices ahead of the event.

While identifying the same, Bloomberg said, After 100 basis points of cuts so far this year, Bank Indonesia will probably keep the seven-day reverse repurchase rate at 4% on Wednesday, according to 20 of 25 economists surveyed by Bloomberg. The others expect a 25 basis-point cut.”

Other than the BI rate decision, the pair traders should keep eyes on the virus updates and the US-China trade war headlines ahead of the FOMC minutes. Also important will be any more clues concerning the American COVID-19 relief bill.

Technical analysis

Having marked another pullback from 100-day SMA, currently around 14,840, USD/IDR may revisit a 21-day SMA level of 14,700. Though, the pair’s further downside will be limited by an ascending trend line from June and 200-day SMA near 14,535-25.