Myinvestas.com - Bank Indonesia (BI) took a firm step to help the Rupiah face Dollar appreciation by raising interest rates the second time this month (At the time this article was written).
BI increased the seven-day repo rate to 4.75% from 4.5% to cope with capital outflows. A rate hike may help the Rupiah, but this aggressive upsurge cycle also has the potential to have a negative impact on economic growth. The new interest rate will be effective from 31 May and USDIDR may test the level 13940 then 13900 .
- The euro was pressured by fears of "Italexit"
Some days this is a difficult time for the Euro which slumped to its lowest level since July 2017 due to the development of political turmoil in Italy.
Media said that Italy's interim Prime Minister Carlo Cottarelli failed to garner support from some of the largest political parties so President Sergio Mattarella may dissolve Parliament in the coming days. The possibility of new elections could strengthen the position of the Euroskeptis party and trigger a European referendum will keep investors wary. Sentiment towards the Euro will still be bearish and because of the odds "Italexit" the greater and feared endangering the future of the European Union, so the Euro will likely continue to weaken.
It should be noted that the depreciation of the Euro may slightly help the ECB's efforts to achieve the 2% inflation target by making exports more competitive and imports more expensive. However, political instability in Europe negatively affects growth and increases the likelihood that quantitative easing programs will continue in 2019.
From a technical point of view, EURUSD remains bearish on the daily chart even though the price bounces towards 1.1600 this morning. Previous support level at 1.1600 can turn into dynamic resistance that pushes further decline towards 1.1450 . Instead, breakout above 1.1600 can pave the way to 1.1750 .
Media said that Italy's interim Prime Minister Carlo Cottarelli failed to garner support from some of the largest political parties so President Sergio Mattarella may dissolve Parliament in the coming days. The possibility of new elections could strengthen the position of the Euroskeptis party and trigger a European referendum will keep investors wary. Sentiment towards the Euro will still be bearish and because of the odds "Italexit" the greater and feared endangering the future of the European Union, so the Euro will likely continue to weaken.
It should be noted that the depreciation of the Euro may slightly help the ECB's efforts to achieve the 2% inflation target by making exports more competitive and imports more expensive. However, political instability in Europe negatively affects growth and increases the likelihood that quantitative easing programs will continue in 2019.
From a technical point of view, EURUSD remains bearish on the daily chart even though the price bounces towards 1.1600 this morning. Previous support level at 1.1600 can turn into dynamic resistance that pushes further decline towards 1.1450 . Instead, breakout above 1.1600 can pave the way to 1.1750 .
- Currency highlight - GBPUSD
The pound slumped sharply against the Dollar because of fears of a breakup of the European Union.
Risk aversion due to the Italian political turmoil prompted investors to seek safety so the Pound weakened. Brexit uncertainty and declining expectations of BoE rate interest worsened the situation for the Pound, so the currency is potentially slipping further. From a technical point of view, GBPUSD depressed on daily and weekly charts. Continuous downturn below 1.3340 can lead to further depreciation towards 1.3170 then 1.3100 .
Risk aversion due to the Italian political turmoil prompted investors to seek safety so the Pound weakened. Brexit uncertainty and declining expectations of BoE rate interest worsened the situation for the Pound, so the currency is potentially slipping further. From a technical point of view, GBPUSD depressed on daily and weekly charts. Continuous downturn below 1.3340 can lead to further depreciation towards 1.3170 then 1.3100 .
- Commodity Highlights - WTI Crude Oil
Oil prices were somewhat volatile on Wednesday after falling sharply in recent days because of the possibility that OPEC and Russia will ease production restrictions as global crude inventories decline.
OPEC and Russia's plans to increase production have the potential to generate oversuplai concerns and invite bears, so that WTI crude oil prices are threatened to continue to weaken. We should also note that geopolitical risk factors such as sanctions against Iran, declining Venezuelan output, and tensions in the Middle East could strengthen oil prices in the short term. However, the potential for increased Russian and OPEC production and increased US shale oil production could be a barrier to oil in the longer term
OPEC and Russia's plans to increase production have the potential to generate oversuplai concerns and invite bears, so that WTI crude oil prices are threatened to continue to weaken. We should also note that geopolitical risk factors such as sanctions against Iran, declining Venezuelan output, and tensions in the Middle East could strengthen oil prices in the short term. However, the potential for increased Russian and OPEC production and increased US shale oil production could be a barrier to oil in the longer term
