USD/IDR seesaws around 14,100 amid trade jitters, eyes on Bank Indonesia rate decision

• The USD/IDR pair struggles to justify broad USD strength and expectations of a no rate cut from the Bank Indonesia (BI).
• BI officials argue overall doubting sentiment on the Asian economy.
• The US and Indonesia recently vowed to double the trade volume.

Clubbed between the US-China trade angst and a less likely offer of the fifth rate cut from BI, the USD/IDR pair takes rounds to 14,100 during early Asian session on Thursday.

The pair recently benefited from the broad US dollar (USD) strength that has begun taking clues from the US-China tussle. On the front, Reuters’ anticipate that the United States (US) President Donald Trump will sign Hong Kong Human Rights Bill passed by the Congress and add pressure on to the Asian economies via trade-war risk.

On the positive side, Xinhua released news stating that officers from the US and Indonesia have pledged to edge up the trade volume by twice in the next five years as the two nations still have more business opportunities that can be explored further.

Further, the anticipation of a halt to the Bank Indonesia’s rate cut trajectory after four consecutive actions, as suggested by Bloomberg, should add strength to the Indonesian Rupiah (IDR). It’s worth mentioning that the BI Governor Perry Warjiyo and Deputy Governor Dody Budi Waluyo stayed positive for the economy and the domestic currency while crossing wires during the early-month appearances.

Looking forward to the Bank Indonesia’s (BI) rate decision, the Asian nation’s central bank is expected to announce no change to its benchmark rate of 5.0%. “We look for no change from Bank Indonesia. BI cut its 7-day reverse repo rate by 25bp to 5% at its last meeting but indicated that they will be increasingly data-dependent going forward. Since then CPI came in lower than expected, while manufacturing and consumer confidence fell further and Q3 GDP slowed. The weaker growth trajectory should not have come as a surprise, however, and we don’t think it will automatically imply an immediate rate cut. We expect BI to slow the pace of rate cuts, with a pause expected at this meeting as the Bank assesses the impact of previous easing,” says TD Securities ahead of the event.

Technical Analysis

Prices need to cross three-month-old falling trend line, at 14,195 now, in order to take aim at October high near 14,275, failing to which can keep prices around 14,100 and 14,000. It should also be noted that 13,880 acts as the key downside support below 14,000.