Morning Dew - 6 December 2013

Stability Over Growth

The BI mantra – “Stability over growth” – along with the anticipation of Federal Reserve stimulus tapering have sent bulls on the run worldwide.

BI’s number 2, Mirza Adityaswara reiterated BI’s target to curb current-account deficit even at the expense of economic growth (GDP). The argument is that capital inflows will return once CAD has been dealt with and when that happens, BI can ease its current tightening bias.

The objective is to hit below 3% of GDP on CAD next year whereas at the moment deficit was at 3.8% in 3Q13.

Rupiah has continued its slide so far, despite BI’s aggressive stance. Rallies had met with demand, sending rupiah lower against the greenback.

Eyes on Payrolls

Payrolls are expected to see a dip in November from 204k to 185k. Unemployment rate however, is expected to tick down to 7.2% from 7.3%.

Note that a strong payrolls data may backfire as the data will raise the odds that the tapering is happening soon.

Personal income is seen to have slowed to 0.3% from 0.5% in prior month, while October’s personal spending is expected to stay growing by 0.2%.

Jobless claims for the week ended Nov 29th were down to 298k, from 321k a week earlier and better than what the market had expected (320k). Elsewhere, factory orders fell 0.9% after a 1.8% increase in September.

Technically Speaking...

Despite a good start this week, JCI is still not out of the woods. The index is still way below the EMA band (4,400-4,490). 

Resistance is seen at 4,400 first, followed by 4,490, while on the downside the recent low at 4,202 will provide cushion for the index. JCI has toyed with the lower end of the consolidation band and the outlook is not getting better so far. Instead…

MACD has turned south instead of going higher above zero line. RSI too, is going lower again.

Should 4,202 falls, JCI is at risk of falling towards the next support at 4k. Near-term, 4,331 is expected to cap the index.

Day Ahead

Being hit on two front: domestic and abroad, JCI is expected to remain vulnerable this Friday. As the index is at risk of falling out of its consolidation range between 4,200-4,400, we can expect a shift down the line to 4,000-4,200 at the moment. It is clear that JCI is becoming more BI-sensitive rather than Fed-sensitive. 

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