Short-Term Bearish, Long-Term Bullish

Concerns over the sovereign debt situation in the eurozone have sparked a renewed wave of risk aversion and we believe that the Indonesian rupiah is unlikely to be let off the hook. Indeed, the rupiah had previously struggled to overcome resistance at IDR9,000/US$, and is now starting to look technically weak after ploughing through nine-month trendline support in early May. As such, we suspect that risks for the rupiah are weighted to the downside and we are targeting a move towards IDR9,500/US$ in the short term, a breach of which might see the rupiah weaken towards the IDR10,500/US$ level.

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