- The Indonesian Rupee has continued to lose ground to the USD.
- The Indonesia economy remains healthy from a GDP perspective and Bank Indonesia oversight is respected, but the USD/IDR has certainly seen a rather bullish trend over the past six months.
- Concerns about U.S interest rate policy compared to Bank Indonesia remains in focus.
- The USD/IDR is trading near the 16,292.00000 ratio as of this writing.
The 16,300.00000 level was momentarily challenged early this morning in USD/IDR. Plenty of attention is focused on the U.S Federal Reserve which will release its FOMC Statement later today. While the Fed is not going to cut its Federal Funds Rate, financial institutions are certainly intent on listening to the U.S central bank’s rhetoric and if a more dovish sound tone is heard regarding the mid-term.
Higher Challenged and a Upwards Trend
Traders of the USD/IDR should know that trading volumes while large still can produce sudden jolts of volatility within the currency pair because of unbalanced orders. Today’s Fed policy statement however is not the only thing on the schedule from the U.S which can cause price velocity in the USD/IDR, this because U.S Consumer Price Index data will be released in a handful of hours. Meaning inflation data will hit the global Forex market a about five and a half hours before the Fed’s briefing.
The Bank Indonesia key borrowing rate is at 6.25% and has been recently raised in order to combat inflation in the nation which remains sticky. The BI is also trying to navigate the rather murky waters which the Federal Reserve has caused by its cautious Federal Funds Rate. If the Fed shows signs of potentially cutting its interest rate in the near-term this could help generate some selling in the USD/IDR. But speculators who want to bet on a more dovish Fed might want to wager on what the U.S inflation data outcome will be beforehand, and the CPI statistics have proven tricky the past few months.
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USD/IDR Coming Volatility and Reversals as Positions are Abruptly Changed
Today’s storm from the U.S because of the inflation and Fed reports will definitely cause volatility in the USD/IDR. Day traders need to understand large financial institutions will react to the U.S data reports depending on the statistics and then take positions before the Fed’s FOMC Statement.
· Some financial institutions and speculators may believe the USD has been overbought in recent trading, but the last six months have continued to remind day traders that choppy waters have been abundant and that simply wishing on a result doesn’t mean it will happen.
· On the 16th of May the USD/IDR was trading near the 15,917.00000 ratio based on the hope the Fed would become more dovish sometime this coming summer, since then the currency pair has climbed higher, correlating in many ways to other major currencies teamed against the USD.
· Risk management will be essential today; this as financial institutions will question the Fed’s ability to actually cut the Federal Funds Rate. The CPI report will tell us a lot.
USD/IDR Short Term Outlook:
Current Resistance: 16,299.00000
Current Support: 16,278.00000
High Target: 16,312.00000
Low Target: 16,225.00000
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