USD/IDR: Recovery potential after geopolitical de-escalation – OCBC

OCBC strategists Sim Moh Siong and Christopher Wong notes USD/IDR has turned lower with the broader US Dollar (USD) pullback, but says recent Indonesian Rupiah (IDR) softness reflects external uncertainty from a potential prolonged United States (US)–Iran conflict and vulnerability to energy shocks. While concerns persist, the bank sees room for IDR to recover once 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 turned lower overnight amid broad USD pullback and the uptick in risk sentiments. Irans proposal to US may have partially helped to de-escalate geopolitical uncertainties though oil prices staying higher raises the question if the Monday rebound in oil-sensitive Asian FX, including IDR can be sustained.”

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

“While concerns remain in the interim, we see room for IDR to recover at some point when geopolitical situation de-escalates more meaningfully, alongside oil prices easing. USD/IDR last seen at 17195 levels. Mild bullish momentum on daily chart shows tentative signs of fading while RSI eased lower.”

“Recent price action may also represent a short term exhaustion pattern after a sharp topside break. We are keeping a look out for any continuation in the pullback though it remains early to concur a major trend reversal at this point. Support at 17100 levels (21 DMA), 16960 (50 DMA). Resistance at 17250, 17315 levels.”