Can’t trade the Russian Ruble? Look to Eastern European EMs
The volatility for the Russian Ruble is unprecedented. USD/RUB broke through all-time highs on February 24th at 85.98. However, it wasn’t until Russia was removed from SWIFT last weekend that the pair spiked higher, reaching an intra-day and all-time high of 122.25 on Wednesday. The Bank of Russia went as far as to say it can no longer prevent the collapse of the Ruble. As a result, most banks and brokers are unable to quote the exchange rate for Ruble pairs (the Bank of England today even said it would stop quoting Ruble exchange rates), leaving many traders frustrated that they can’t take advantage of the volatility.
Source: Tradingview, Stone X
What are Emerging Market currencies?
As we had written about earlier in the week, some of the Eastern European Emerging Market currencies are highly correlated with USD/RUB. The current correlation coefficient between USD/PLN and USD/RUB is +0.96. A correlation coefficient of +1.00 means that there is a perfect positive correlation and that the 2 assets move in the same direction 100% of the time. A reading of +0.96 is pretty close. USD/PLN twice pierced through all-time highs at 4.3078 but failed to close above it, until today. The pair also broke through a trendline dating to March 31st, 2021.
Source: Tradingview, Stone X
On a 240-minute timeframe, USD/PLN has been trading in a channel higher since February 25th. First resistance is at yesterday’s high of 4.3536, then the 161.8% Fibonacci extension of the highs of November 23rd, 2021 to the low of February 10th at 4.3841. The next resistance is at the top trendline of the upwards sloping channel near 4.4015. First support is at the previous all-time high at 4.3078, then yesterday’s low and the bottom, upward sloping trendline of the channel near 4.2518. Additional horizontal support sits just below at 4.2395.
Source: Tradingview, Stone X
USD/HUF and USD/RUB currently have a correlation coefficient of +0.95. Therefore, the 2 currency pairs have a strong correlation on the daily timeframe. Yesterday, USD/HUF pierced all-time new highs near 341.25, however failed to close above it. The pair also broke above the long-term horizontal trendline dating back to March 9th, 2021.
Source: Tradingview, Stone X
On a 240-minute timeframe, USD/HUF has been trading higher in a well-organized channel since February 22nd. First resistance is at yesterday’s high of 345.66, then the 161.8% Fibonacci extension from the highs of December 15th, 2021 to the low of February 6th near 349.84. The next resistance is at the upward sloping trendline of the channel near 352.00. First support is the previous all-time highs of 341.25, which is also the bottom trendline of the upward sloping channel. Below there, USD/HUF can fall to the highs from March 15th at 333.46.
Source: Tradingview, Stone X
A quick look at the USD/CZK shows that it’s correlation with the USD/RUB is +0.95, also very high. However, the USD/CZK is NOT trading near all-time highs (which is 26.50), as are USD/PLN and USD/HUF. The pair broke above previous highs from December 15th and the trendline dating back to March 5th. It currently is banging against the 50% retracement level from the highs of March 2020 to the lows from May 2021 near 23.3973.
Source: Tradingview, Stone X
Horizontal resistance sits just above at 23.4863, then the 161.8% Fibonacci extension from the highs of November 26th, 2021 to the lows of January 18th at 24.0516. There is also long-term horizontal resistance at this level dating back to November 2020. First support is at the previous resistance (old highs) near 22.9325. Below there, price can fall all the way to horizontal support at 22.0105.
Learn more about forex trading opportunities.
From time to time, StoneX Financial Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.
As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.
City Index is a trading name of StoneX Financial Pty Ltd.
The material provided herein is general in nature and does not take into account your objectives, financial situation or needs.
While every care has been taken in preparing this material, we do not provide any representation or warranty (express or implied) with respect to its completeness or accuracy. This is not an invitation or an offer to invest nor is it a recommendation to buy or sell investments.
StoneX recommends you to seek independent financial and legal advice before making any financial investment decision. Trading CFDs and FX on margin carries a higher level of risk, and may not be suitable for all investors. The possibility exists that you could lose more than your initial investment further CFD investors do not own or have any rights to the underlying assets.
It is important you consider our Financial Services Guide and Product Disclosure Statement (PDS) available at www.cityindex.com/en-au/terms-and-policies/, before deciding to acquire or hold our products. As a part of our market risk management, we may take the opposite side of your trade. Our Target Market Determination (TMD) is also available at www.cityindex.com/en-au/terms-and-policies/.
StoneX Financial Pty Ltd, Suite 28.01, 264 George Street, Sydney, NSW 2000 (ACN 141 774 727, AFSL 345646) is the CFD issuer and our products are traded off exchange.
© City Index 2024