Rupiah Breaks IDR 15,000/US$, Pertalite Increases to IDR 10,000?

The rupiah exchange rate weakened 0.54% against the United States (US) dollar last week to Rp 14,985/US$. This week, the increase in the price of subsidized fuel oil (BBM) for the type of Pertalite and Solar will be one of the main drivers.

As is known, President Joko Widodo (Jokowi) finally decided to increase the price of subsidized fuel oil (BBM). The price of Pertalite was decided to increase from IDR 7,650 to 10,000 per liter, an increase of about 30%. Subsidized diesel rose from IDR 5,150 per liter to IDR 6,800 per liter, non-subsidized Pertamax increased from IDR 12,000 to IDR 14,500 per liter.

"This is the government's last option, which is to divert fuel subsidies. So that the prices of several types of fuel that have been subsidized so far will undergo an adjustment," Jokowi said in a conference with the related ministers regarding the transfer of fuel subsidies, which was broadcast on the Presidential Secretariat's Youtube account, Saturday (3/9/2022). ).

Looking back, the rupiah has always been the victim of an increase in subsidized fuel prices.

Since the era of President Susilo Bambang Yudhoyono (SBY) to Joko Widodo (Jokowi), subsidized fuel has been increased 5 times. SBY raised 4 times, while Jokowi once in 2014 when he first served as RI 1.

In 2005, SBY increased subsidized fuel twice, in March by 29% and in October by 114%.

Then in May 2008, the government again raised fuel prices by 28% in May 2008. Before completing his two terms in office, SBY also raised fuel prices by 30% in June 2013.

Jokowi, who took office as president in October 2014, immediately kicked off by increasing fuel prices by 34%.

At the end of October 2014, before the increase in Premium fuel, the rupiah was in the range of Rp 12,080/US$ and then continued to weaken until it touched Rp 12,930/US$ in mid-December. The decline was recorded at more than 7% in a month and a half.

The same thing happened the year before. The government raised fuel prices in June 2013 which triggered an increase in inflation to 8.38% year-on-year (yoy). The rupiah continued to weaken until it penetrated above Rp. 10,000/US$. The weakening of the rupiah was exacerbated by the issue of the Fed's tapering.

In 2008, fuel prices were raised in May, not long after the rupiah weakened by around 1.7%. Meanwhile, in 2005, when there were two increases, the rupiah responded differently. The first increase was responded by dropping 5.9%, while the second rose 6.5%.

If viewed throughout the year, every time there is an increase in fuel prices, the rupiah is always recorded to weaken. In 2005, the decline was around 6%, and in 2008 by 15.5%, it was also due to the global financial crisis.

2013 was even worse, the rupiah fell by more than 26%, once again due to the issue of the Fed's tapering. Last 2014, the rupiah weakened slightly by 1.8%, but because the fuel price was only raised in November. The weakening of the rupiah continued until 2015, it was recorded at around 11%.

Indeed, there are other factors that affect the decline in addition to the increase in fuel prices. Such as the 2008 global financial crisis and the taper tantrum from 2013 to 2015. Well, next year there will also be big risks as mentioned earlier, ranging from the aggressive increase in the Fed's interest rates, to the risk of a world recession which of course could depress the rupiah.

Technically, the rupiah which is symbolized by USD/IDR is near the strong resistance of Rp. 14,885/US$ to Rp. 14,890/US$ which can withstand the weakening of the rupiah. The resistance is the 50-day moving average (50/MA50 moving average).

In the last week, this resistance has kept the rupiah from weakening several times.

Meanwhile, the Stochastic indicator on the daily chart is now entering the overbought area.

Stochastic is a leading indicator, or an indicator that initiates price movements. When Stochastic reaches the overbought (above 80) or oversold (below 20) territory, the price of an instrument has the opportunity to reverse direction.

This means that the rupiah has a chance to strengthen this week.

The closest support is now in the range of Rp. 14,860/US$ to Rp. 14,850/US$, if it is exhaled, the rupiah has the chance to strengthen to Rp. 14,830/US$ - Rp. 14,800/US$ this week.

If this level is breached, the rupiah has the opportunity to strengthen further towards strong support at around Rp. 14,730/US$, which is the 61.8% Fibonacci Retracement.

The Fibonacci Retracement was pulled from the lowest point on January 24, 2020 at Rp. 13,565/US$ and the highest on March 23, 2020, at Rp. 16,620/US$.

On the other hand, if the MA 50 is breached, the rupiah is at risk of weakening to Rp. 14,920/US$ to Rp. 14,930/US$. A consistent break above this level will bring the rupiah towards Rp 15,000/US$.