Forex world

December 01, 2022

USD/IDR retreats towards $15,650

- USD/IDR bounces off two-week low on softer Indonesia Inflation.

- Indonesia Inflation, Core Inflation missed upbeat forecasts in November.

- Hopes of Fed’s smaller rate hikes, China-linked optimism underpin bearish bias.

- US Core PCE Price Index, ISM Manufacturing PMI appears crucial for immediate directions.

USD/IDR rebounds from intraday low to $15,635 during early Thursday as downbeat Indonesia inflation numbers allowed bears to take a breather at the lowest level in a fortnight. Also likely to have probed the pair sellers could be the latest shift in the market’s mood ahead of the key US data.

Indonesia's Inflation number eased to 5.42% YoY versus 5.49% expected and 5.71% prior whereas the Core Inflation dropped to 3.30% compared to 3.40% market forecasts and 3.31% previous readings. Even so, the inflation number remains beyond Bank Indonesia’s target range of 2% to 4.0% and hence favors the Indonesia Rupiah (IDR) buyers.

It’s worth noting that BI Governor Perry Warjiyo said on Wednesday that they would maintain a front-loaded and pre-emptive interest rate policy next year to control inflation.

On the other hand, dovish comments from the Federal Reserve (Fed) officials, including Chairman Jerome Powell, joined softer US employment-linked data to weigh on the USD/IDR price the previous day. On the same line was the easing in the virus-led activity controls in China as the dragon nation reports the third day of declining daily infections after refreshing the record top.

Even so, a recent increase in the US inflation expectations, as per the 10-year and 5-year breakeven inflation rates per the St. Louis Federal Reserve (FRED) data, should have also probed the USD/IDR downside. Additionally pleasing the USD/IDR bears could be the downbeat comments from US National Security Adviser Jake Sullivan suggesting fresh challenges for the Sino-American optimists. The diplomat said, “The US sees China as a growing strategic threat.”

Moving on, the Fed’s preferred inflation gauge, namely US Core Personal Consumption Expenditure (PCE) Price Index for October, expected 5.0% YoY versus 5.1% prior. Additionally important will be the monthly prints of the US ISM Manufacturing PMI for November, expected 49.8 versus 50.2 prior, as well as headlines surrounding China and comments from the Fed policymakers.

Technical analysis

A clear downside break of three-month-old ascending support line, now resistance near $15,660, favors the USD/IDR bears targeting the monthly low near $15,310.


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