The rupiah was further away from Rp 14,000/US$ last week, even though previously the psychological level was almost broken. Last week, the rupiah weakened 0.32% against the United States (US) dollar to Rp. 14,165/US$, according to Refinitiv data.
The opportunity for the rupiah to penetrate Rp 14,000/US$ this week is also quite slim, considering that the US central bank (The Fed) will announce monetary policy on Thursday morning Indonesian time.
The Fed is almost certain to taper or reduce the value of its quantitative easing (QE) program this year, and the announcement will be made on Thursday.
Tapering had occurred in 2013 and made the rupiah exchange rate plummet. But now the conditions are different from 2013, Indonesia's fundamentals are much better.
In addition, although the tapering has been confirmed by the chairman of the Fed, Jerome Powell. However, unlike 2013, the tapering this time was taken lightly by market participants, yet there has been no visible turbulence in global financial markets.
The Fed Decides to Tapering
The Fed has successfully communicated with the market. In 2013, when there was a taper tantrum due to the tapering announcement, poor communication from the Fed was said to be the cause.
Even though market participants are still taking wait-and-see actions until they get certainty when the official tapering will take place and how much. The market is currently seeing tapering as early as mid-November with a value of US$ 15 billion per month from the current US$ 120 billion per month.
In addition to tapering, market participants will also see a signal when interest rates will be raised. If the Fed is not aggressive in tapering and interest rates are projected to rise only in 2023, the rupiah is likely to strengthen this week.
Technically, there has been no change in levels to watch out for because there has not been a big move. Rupiah is still in the fourth wave of the Elliott Wave, which continues to weaken, which is a correction phase, before forming wave 5 which is the continuation of the strengthening trend of the rupiah.
Rupiah previously reached the top of wave 3 as seen from the Doji pattern formed on Friday. Psychologically, the Doji is an indication that market participants are confused in determining the direction, whether to continue strengthening or correcting.
When USD/IDR is oversold, the price has the potential to move up, meaning that the rupiah weakens. Rupiah is out of oversold and Stochastic is moving up.
Some Steps Taken from Tapering
If it stays below it, the rupiah is at risk of weakening to Rp 14.20, which is the Fib range. 38.2% retracement. The risk of wave 4 correction could reach Rp. 14,250/US$ (Fib. Retracement 50%) this week.
On the other hand, if it returns under Fib. 23.6% retracement, the rupiah can strengthen today, with the target area of Rp 14,070/US$ being the closest support. A break below this level will open opportunities to Rp 14,000/US$ this week.
Based on the minutes of the September FOMC meeting, the Fed plans to announce a tapering off or tightening of stimulus at this week's meeting. Tapering is in the form of reducing the purchase of assets worth US$ 15 billion from routine purchases of US$ 120 billion.
Referring to the minutes of the meeting, it is likely that the tapering will begin in mid-November or December at the earliest. However, they have repeatedly emphasized that the move has nothing to do with the interest rate hike, which is still uncertain when it will start.
Meanwhile, the market anticipates an increase in the US benchmark interest rate in the second half of next year. One of the main considerations for the increase in interest rates is due to high inflation expectations that will last for a long time until next year.
