IDR: USD/IDR Holding Close to 16500, Rupiah Not Benefiting From Lower US Yields
USD/IDR sits little changed in the first part of Thursday dealings. The pair was last near 16460/65. This leaves us close to recent highs around the 16500 level. This still looks like a meaningful resistance point. Since June of this year, we haven't been able to move meaningfully above the 16500 level. ON the downside, the 200-day EMA is back close to 16260.
- Focus remains on the domestic political backdrop, with the new FinMin quick to start pulling levers to boost the growth outlook. Via BBG: "- Indonesia's new finance minister unveiled a roughly $12 billion cash injection to stimulate lending, proving his commitment to President Prabowo Subianto's growth agenda barely two days into the job."
- Local equities are up today, the JCI +1% firmer, but the index remains within recent ranges and still sub recent cycle highs above 8000. Critical for IDR will be whether efforts to boost growth/market sentiment aid stronger offshore inflows. Up until yesterday the recent tone had been for outflows from both local equities and bonds.
- USD/IDR also looks too elevated relative to the decline in US real 10yr yields, see the chart below. Uncertainty as to how the fiscal outlook will unfold onshore is leaving rupiah sentiment cautious to a degree, with the market seemingly more comfortably expressing bearish USD views (based off the Fed outlook) elsewhere for now. Still, other metrics like the 5yr CDS rate, while above recent lows, remain well-behaved.
- Locally, the next big focus point will be the BI decision next week, with the current consensus at no change from the current 5.00% policy rate.
Fig 1: USD/IDR High Relative To Lower US Real Yields
Source: Bloomberg Finance L.P./MNI
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FOREX: Asia FX Wrap - USD Treads Water Ahead Of CPI
The BBDXY has had a range of 1206.70 - 1207.69 in the Asia-Pac session, it is currently trading around 1207, -0.10%. The USD bounced in the N/Y Session as some shorts pared back their exposure as we look toward the US CPI tonight. A sustained break back below 1198 points to a retest of the lows, and a bounce back towards 1220/1230 should probably be faded initially. Where the CPI comes in tonight will determine which level gets tested.
- EUR/USD - Asian range 1.1610 - 1.1625, Asia is currently trading 1.1620. The pair has bounced nicely off the important 1.1300/1.1400 area. The market has stalled at its first attempt to challenge the resistance around the 1.1700 area. Having moved away from 1.1700 the US CPI tonight will determine if we have another go at it.
- GBP/USD - Asian range 1.3426 - 1.3440, Asia is currently dealing around 1.3430. The pair bounced nicely off the 1.3100/1.3200 support area. Sellers saw the move higher stall just above 1.3450 and the US CPI will have a say in if that is now the top in the short-term.
- USD/CNH - Asian range 7.1895 - 7.1965, the USD/CNY fix printed 7.1418, Asia is currently dealing around 7.1930. Sellers should be around on bounces while price holds below the 7.2200/2500 area and the PBOC manages the fix lower. Above 7.2500 and we could see a test of the USD Shorts.
- Cross asset : SPX +0.07%, Gold $3352, US 10-Year 4.283%, BBDXY 1207, Crude Oil $64.18
- Data/Events : EZ Zew Survey, Germany Zew Survey/Current Account Balance
Fig 1: GBP/USD Spot Daily Chart
Source: MNI - Market News/Bloomberg Finance L.P
JPY: Asia Wrap - USD/JPY Probes Above 148 As Shorts Pared Back Into US CPI
The Asia-Pac USD/JPY range has been 148.05 - 148.45, Asia is currently trading around 148.45, +0.19%. USD/JPY is probing above 148.00 as the market pares back on some USD’s shorts going into the US CPI tonight. Price is holding above the support area between 146.00/147.00, a move sub 145.00 is needed to turn momentum lower once more, until then the 145.00-151-00 range should dominate. US CPI tonight will determine which end of the range is tested.
- MNI US CPI Preview: High Early Bar To September Fed Hold. The CPI report for July is released on Tuesday Aug 12, at 0830ET. Consensus sees core CPI inflation at a seasonally adjusted 0.3% M/M in June and unrounded analyst estimates broadly echo this with a median 0.32% M/M. It would mark a further acceleration from 0.23% M/M in June and 0.13% M/M in May for its fastest pace since January, with the latest firming seen coming from core goods inflation doubling to 0.4% M/M.
- (Bloomberg) -- Bond investors betting on a Federal Reserve interest rate cut next month face a potential roadblock: inflation. July’s consumer price index, due on Tuesday, will give traders clues on how President Donald Trump’s tariffs are affecting costs. Economists surveyed by Bloomberg expect the annual core inflation rate to rise to 3%, the highest since February.
- Options : Close significant option expiries for NY cut, based on DTCC data: 147.30($878m), 146.00($597m).Upcoming Close Strikes : 147.00($1.01b Aug 13), 150.25($1.47b Aug 13) - BBG.
- CFTC data shows asset managers reduced their JPY longs +60532( Last +75119), leveraged funds slightly reduced their newly built short JPY position -29308(Last -31280).
Fig 1 : USD/JPY Spot H2 Chart
Source: MNI - Market News/Bloomberg Finance L.P
OIL: Crude Range Trading Ahead Of Key Events Later Tuesday
Oil prices are slightly higher today ahead of US July CPI data, industry-reported US inventories, and EIA and OPEC monthly reports out later. Moves so far this week signal some stabilisation as the market watches the outcomes of the week’s events, which also include Friday’s Trump-Putin meeting on Ukraine.
- WTI is up 0.3% to $64.17/bbl after rising to $64.22 and then falling to $63.90 – a narrow range. Brent is also 0.3% higher at $66.83/bbl and has traded between $66.92 and $66.60.
- Trump said that Friday is more of a “feel-out meeting” and that he will report back to Ukrainian/European leaders afterwards. So it remains some time before the easing of sanctions on Russia can be considered.
- The 90-day extension of the current US-China trade stance to November 9 has calmed markets concerned that an escalation in trade tensions would weigh on growth and especially energy demand.
- US July CPI data are forecast to show both core and headline ticking up 0.1pp to 3.0% and 2.8% respectively (see MNI US CPI Preview) and will be monitored for signs of any tariff impact. A higher-than-expected print could pressure oil as demand concerns would increase. The market has around an 85% chance of a rate cut for the Fed’s September meeting.
- July US NFIB small business optimism, real earnings and budget data are also released, as well as UK labour data and euro area/German August ZEW sentiment. The Fed’s Barkin and Schmid speak on the economy.
