USD/IDR: Bullish outlook as Indonesia inflation slips again

September 01, 2023 10:18 AM AEST | By Invezz

USD/IDR: Bullish outlook as Indonesia inflation slips again — Image source: Invezz

Indonesia inflation falls again

The USD to rupiah rate reacted to the encouraging economic data from Indonesia. A report by the country’s statistics agency showed that the headline consumer price index (CPI) dropped from 0.21% in July to minus 0.02% in August.

On a YoY basis, the headline CPI rose from 3.08% to 3.27%. Economists polled by Reuters were expecting the number to come in at 3.33%. Excluding the volatile food and energy prices, Indonesia’s inflation fell from 2.43% to 2.18%.

These numbers mean that the actions of the Indonesian central banks are working. Like other central banks, it has delivered several rate hikes in the past few months.

Therefore, analysts believe that the central bank will continue pausing rates for the remaining part of the year. Some economists see the bank slashing rates in the next few meetings.

The USD/IDR exchange rate also reacted to the positive manufacturing PMI data. According to Nikkei, Indonesia’s manufacturing PMI rose from 53.3 in July to 53.9 in August. A PMI reading of 50 and above is usually a positive sign that the sector is expanding.

Looking ahead, the next key catalyst for the USD/IDR exchange rate will be the upcoming US NFP data, which I wrote about here. These numbers are expected to show that the US labor market softened in August as the economy added 170k jobs. Analysts believe that the unemployment rate remained unchanged at 3.5%.

The NFP data will come a day after the US published steady personal consumer expenditure (PCE) data. The report revealed that the country’s inflation remains stubbornly high.

USD/IDR forecast

The USD/IDR exchange rate has been in a strong bullish trend in the past few months. It has formed an ascending channel, which is shown in black. The pair is between this channel and is slightly above the 25-day and 50-day moving averages.

It is also a few points above the crucial support level at 15,217, the highest point on June 11th. Therefore, the outlook for the pair is bullish, with the next level to watch being at 15,400.

The post USD/IDR: Bullish outlook as Indonesia inflation slips again appeared first on Invezz.

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