Potential Correction Rupiah

The new prime quarter ended in 2010, presents some important notes in the Indonesian financial sector. Dramatic movement of the Composite Stock Price Index (CSPI) also transmitted to the performance of two investment instruments excellent. Rupiah currency and bond markets develop into champions among variants of other assets that were traded by investors. Despite the achievements both in the initial quarter pretty impressive, is not impossible that things will turn around in the next period. Performance of emerging market assets, including bonds, looked impressive with the best performance record of 5.1 percent. Instruments that give high yields, such as SUN, succeeded in pushing the currency to appreciate 3.7 percent this year. So that the rupiah could enter ranks of the big three currencies with the best performance of 10 Asian currencies most actively traded.

In the midst of market euphoria, the star of Indonesia’s financial sector in the first quarter is still held by JCI. Index would not stop a new record high every week. This phenomenon occurs when the flow of foreign capital into the Indonesian stock market can not be unstoppable.
Based on data from the Indonesian Stock Exchange (BEI) in March, foreign investors made net stock buying up to Rp 4.9 trillion, after selling the ownership of a total value of USD 1.6 trillion in February. JCI increase rate so far this year (Year-To-Date Return) reached 13.1 percent. Making Indonesia as well as leaders of Asian stocks beat Thailand (10.2 percent YTD Return) and Malaysia (8.9 percent YTD Return). When we noticed, there is an interesting correlation between sovereign debt rating to investment and capital market performance. The atmosphere in the capital markets outside the United States (U.S.) is very flat which is the principal cause hot money flows into emerging market assets of Indonesia. However, foreign funding of short-term nature of this can be stopped at any time. Outside investors can leave the market at any time, since absorbed by the rate of economic recovery in the U.S. and Europe.

Potential correction rupiah
In the second quarter, which began limited reinforcement JCI could make a trend inversely proportional amount of the previous period. Why is this so? There are several reasons that could be considered regarding this possibility. The first factor is the trend of U.S. capital markets that began fueled goes up to the stock index level reached before the bankruptcy of Lehman Brothers. If this trend continues, then the attractiveness of the assets look more attractive countries for investors.
Indeed the U.S. stock chart is very dependent on the trend in the labor sector. The unemployment rate is increasingly eroded by a sign that that trend will not show any changes. Different situations shown in the financial sector, the European region. Psychological pressure from the Greek crisis still haunt stock markets of Portugal, Ireland, Greece and Spain. The majority of investors still seem worried about the effect of systemic debt problem of Greece. But these fears can be alleviated by reduced anxiety european market for sovereign risk. So that the hot money can be rolled back into developed country assets within the next three months. The second factor that could end the rally rupiah is expected over the level of interest rate differential (the difference between the excess interest). If market participants begin to expect the U.S. interest rates increase, the difference in interest on foreign assets will reduce the developing markets of Indonesia, particularly in capital markets and bonds. Expectations of market participants on the cycles of U.S. interest rate rise in the second quarter is predicted to rise, based on U.S. economic data is improved. Accumulation of potentially positive results of the report raised confidence of foreign investors on the performance of the dollar compared to other currencies.
Referring to the technical analysis of USD / ZAR at the Daily and Weekly charts, we can see that the RSI and Stochastic are oversold area. At the same time, the MACD on the Daily chart formation bullish divergence. This fact should change the refractive correction of bullish U.S. dollar against rupiah, at least capable of targeting an area 9200 in the near future. With records, required penetration is consistently above the area from 9090 to 9110 to trigger the momentum correction rupiah weakening further.
In this phase, the level of 9000 to support key to resist further appreciation of rupiah. When the amount penetrate the area below 9000, would trigger a strengthening rupiah to the target area of the Fibonacci 79 percent in 8980.
Based on technical analysis and fundamental, should be the main trend of rupiah is still on track for long-term appreciation. Short-term projections indicate that the amount is still likely to weaken corrected before continuing reinforcement.

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