USD/IDR: Rupiah on edge ahead of Fed and Indonesia rate decisions

July 24, 2023 01:12 PM PDT | By Invezz

USD/IDR: Rupiah on edge ahead of Fed and Indonesia rate decisions — Image source: Invezz

Fed and Bank of Indonesia divergence

The Indonesian rupiah retreated slightly as traders prepare for a divergence between the Fed and the Bank of Indonesia. The BoI will conclude its meeting on Tuesday morning. Analysts believe that the bank will decide to leave interest rates unchanged.

Precisely, they expect the interest rate to remain at 5.75% while the deposit facility and lending facility rates at 5.0% and 6.50%, respectively. Most importantly, there is a likelihood that the bank will signal that it will cut interest rates later this year.

Recent numbers showed that the Indonesian economy is slowing. As I wrote here, the country’s exports and imports slumped in June as demand slowed. At the same time, Indonesia’s inflation slipped to 3.5%. There are also concerns that the country could go through a drought as El Nino takes shape.

On the other hand, the Federal Reserve is expected to hike interest rates when it includes its monetary policy meeting on Wednesday. Economists expect that the bank will hike by 0.25% and push rates to the highest level since 2001.

Most importantly, there is a possibility that the bank will signal the end of the hiking cycle since inflation has dropped and the economy is slowing. The most recent data showed that retail sales, housing starts, and building permits dropped in June.

USD/IDR technical analysis

USD/IDR chart by TradingView

The USD to Indonesian rupiah exchange rate has drifted upwards in the past few days. On the 4H chart, the pair has formed a bearish flag pattern, which is shown in orange. It has moved slightly below the 50-period and 25-period moving averages. The pair has also dropped below the key resistance level at 15,061, the highest point on July 20th.

Therefore, the USD to IDR exchange rate will likely have a bearish breakout as sellers target the next key support at 14,907. A move above the resistance at 15,061 will invalidate the bearish view.

The post USD/IDR: Rupiah on edge ahead of Fed and Indonesia rate decisions appeared first on Invezz.

Disclaimer

The content, including but not limited to any articles, news, quotes, information, data, text, reports, ratings, opinions, images, photos, graphics, graphs, charts, animations and video (Content) is a service of Kalkine Media LLC (Kalkine Media, we or us) and is available for personal and non-commercial use only. The principal purpose of the Content is to educate and inform. The Content does not contain or imply any recommendation or opinion intended to influence your financial decisions and must not be relied upon by you as such. Some of the Content on this website may be sponsored/non-sponsored, as applicable, but is NOT a solicitation or recommendation to buy, sell or hold the stocks of the company(s) or engage in any investment activity under discussion. Kalkine Media is neither licensed nor qualified to provide investment advice through this platform. Users should make their own enquiries about any investments and Kalkine Media strongly suggests the users to seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice), as necessary. Kalkine Media hereby disclaims any and all the liabilities to any user for any direct, indirect, implied, punitive, special, incidental or other consequential damages arising from any use of the Content on this website, which is provided without warranties. The views expressed in the Content by the guests, if any, are their own and do not necessarily represent the views or opinions of Kalkine Media. Some of the images/music that may be used on this website are copyright to their respective owner(s). Kalkine Media does not claim ownership of any of the pictures/music displayed/used on this website unless stated otherwise. The images/music that may be used on this website are taken from various sources on the internet, including paid subscriptions or are believed to be in public domain. We have used reasonable efforts to accredit the source (public domain/CC0 status) to where it was found and indicated it, as necessary.