OCBC strategists Sim Moh Siong and Christopher Wong note that USD/IDR has fallen amid a broader pullback in the United States dollar (USD), but say the recent weakening of the Indonesian rupiah (IDR) reflects external uncertainties arising from the potential for prolonged conflict between the United States (US) and Iran and vulnerability to energy shocks. While concerns persist, the bank sees room for IDRs to recover as geopolitical tensions ease and oil prices decline, with support and resistance levels closely monitored for signs of a deeper pullback.

Geopolitics and energy risk dominate

“USD/IDR fell overnight on a broad USD pullback and rising risk sentiment. Iran’s proposal to the U.S. may have partially helped ease geopolitical uncertainty, although persistently higher oil prices raise questions about whether Monday’s rebound in oil-sensitive Asian currencies, including the IDR, can be sustained.”

“Overall, the softness of the IDR in this episode reflects external uncertainty around the risk of a prolonged U.S.-Iran conflict. Sentiment was further dampened by S&P’s explicit mention that Indonesia is the most vulnerable sovereign in Southeast Asia to a prolonged energy shock.”

“While concerns persist in the meantime, we see room for a recovery in the IDR at some point as the geopolitical situation de-escalates more significantly as oil prices decline. USD/IDR was last traded at 17,195 levels. The mild uptrend on the daily chart shows tentative signs of fading, while the RSI has moved lower.”

“Recent price action may also indicate a short-term exhaustion pattern following a sharp break to the upside. We are looking for a continuation of the pullback, although it is still too early to agree on a significant trend reversal at this point. Support at 17100 (21 DMA), 16960 (50 DMA). Resistance at 17250, 17315.”

(This article was created with the aid of an artificial intelligence tool and has been reviewed by an editor.)