IDR: RSI Suggests MYR/IDR Is Oversold After Piercing Key Support

MYR/IDR trades at IDR3,423 at typing, in close proximity to an eight-month low of IDR3,421 printed on Tuesday. The rate has been trapped in a descending channel this month and managed to pierce support from IDR3,438-3,432 area, which limited losses several times this year (see chart below). The latest sell-off saw the RSI move into oversold territory, casting doubt on potential for a deeper decline.

• Should the RSI manage to bounce back above the 30 threshold, bulls would see an opportunity to retake control. Worth highlighting that bears now keep an eye on Jul 29, 2020 low/channel floor at IDR3,401/3,399, which amount to a significant layer of support.
• The rate has faltered recently, even as Indonesia has become a global epicentre of Covid-19 and has seen its healthcare system battered by the rapid spread of the Delta variant. This prompted Pres Widodo to extend current restrictions through Aug 2.
• In Malaysia, the government unveiled their National Recovery Plan, noting that they expect the whole country to reopen in October. Despite a difficult Covid-19 situation, political shenanigans stole the limelight amid intensive infighting in the ruling coalition.
• Both Bank Indonesia and Bank Negara Malaysia have little scope to ease monetary policy further, albeit Bank Indonesia head Warjiyo all but ruled out further rate cuts and outlined a conditional scenario whereby Indonesian policymakers would begin raising rates in late 2022.

Fig. 1: MYR/IDR

Source: MNI - Market News/Bloomberg