- USD/IDR pares Asian session gains after three-day uptrend.
- Bank Indonesia expected to keep benchmark rate unchanged at 3.5%.
- Upbeat market sentiment tests USD/IDR buyers but yields keep sellers away.
- Second-tier US data, geopolitical/trade news are also eyed for short-term direction.
USD/IDR struggles for clear direction around $14,361, following a three-day uptrend heading into Thursday’s European session.
The pair portrays cautious sentiment on the part of traders even as broad sentiment remains firmer, backed by China’s rate cuts. The reason for the Rupiah trader’s indecision could be linked to the upcoming Bank Indonesia (BI) Rate decision, as well as firmer yields.
The People’s Bank of China (PBOC) surprised markets with a first cut in the 5-year Loan Prime Rate (LPR), by 5 basis points (bps) to 4.60%, in 21 months. Also favoring the risk appetite are chatters surrounding US stimulus and easing fears of the South African covid variant, namely Omicron.
However, geopolitical tension surrounding Russia, Iran and North Korea joins fears of monetary policy consolidation, not to forget US-China trade tension, to weigh on the market sentiment, which in turn favors USD/IDR buyers.
At home, Indonesian Finance Minister Sri Mulyani Indrawati said on Wednesday, “Indonesia consumption and production have returned to pre-pandemic levels.” The policymaker also added that the nation’s Q4 GDP is seen around 5% YoY, taking 2021 full-year growth to 4%.
Moving on, BI Rate Decision will be crucial for USD/IDR as China’s surprise may also tease the Indonesian counterparts to give hints of future monetary policy. In this regard, UOB’s Lee Sue Ann said, “Since inflation is still below the 2%-4% of BI’s target range, the central bank will have the policy space to remain accommodative to support the economic recovery.” The Analyst adds, “We keep our BI rate forecast to stay at the current level of 3.50% in the near term and to start hiking its benchmark interest rates in the latter half of 2022.”
Following the BI verdict, US Jobless Claims, Philadelphia Fed Manufacturing Survey for January and December’s Existing Home Sales will decorate the calendar but major attention will be given to virus woes and Fed rate hike chatters.
Technical analysis
USD/IDR forms inverse head-and-shoulders on the daily chart while portraying the latest recovery from the 100-DMA, around $14,275 by the press time. However, the quote needs to cross the $14,456 neckline to confirm the bullish chart pattern.