CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Open account
☰
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Open account
✖

Is USD/RUB ready for a bounce?

October 28, 2021 10:04 PM

Inflation and Interest Rates

On October 6th, Russia released it’s September inflation report which showed an increase of 7.4% YoY vs and estimate of 7.1% YoY and August’s print of 6.7% YoY.  It was the highest level since June 2016.  16 days later, the Central Bank of Russia tried to put a halt to rising inflation by increasing interest rates 75bps to 7.5%.  Expectations were an increase of only 50 bps. 

What is inflation?

Crude Oil and OPEC+

Russia is one of the world’s leaders in energy exports.  Therefore, as the price of oil and gas increases, so does the value of the Ruble.  Given the energy supply crunch many European countries are facing headed into the colder months, Russia’s Gazprom has been instructed to increase gas supply to fill EU storages.  More supply should equal lower price.  In addition, OPEC+ meets on November 4th. For the moment, oil prices have leveled off between $80 and $85.  US President Biden has asked OPEC to increase output to reduce prices.  Will current high prices and Biden’s request be enough for OPEC to increase output? This would increase the supply, thus lowering the price (and theoretically lowering the price of the Ruble.)

What factors move the price of oil?

Coronavirus

Meanwhile, coronavirus cases are on the rise in Russia, as new daily cases and deaths increased to all-time highs.  Putin has ordered a nonworking week from October 30th to November 7th.  In addition, schools and restaurants will be closed (except for takeout).  This could lead to a potential slowdown in both growth and inflation.  Russia releases October’s Inflation Rate on Wednesday.  Expectations are for 7.2%, lower than September’s 7.4%.  This data point will not include the week-long shutdown.  The Bank of Russia doesn’t meet again until December 17th; therefore, they will have both October’s and November’s inflation prints (which will include the week-long shutdown) before they decide if they will raise rates.

 

Trade USD/RUB now: Login or Open a new account!

• Open an account in the UK
• Open an account in Australia
• Open an account in Singapore

 

USD/RUB broke lower from a long-term symmetrical on May 6th at 74.70 and range-traded between 71.50 and 73.80 until October 15th.  The pair broke below the range but came to a halt at the 61.8% Fibonacci retracement level from the lows of Jan 20, 2020 to the highs of March 18th, 2020, near 69.28.  Horizontal support is just below dating back to June 2020, at 68.035.  Bulls will be looking to buy within this range.  Horizontal resistance is at 71.55, followed by a downward sloping trendline dating back to April 6th near 73.00, and then the 200 Day Moving Average at 73.79.  USD/RUB is highly negatively correlated with Crude Oil.  The current correlation coefficient is -0.93.  A reading below -0.80 indicates a strong, negative correlation.  (A reading of -1.00 is a perfect negative correlation).  Therefore, if crude were to pull back, one would expect USD/RUB to move higher, and vice-versa.

Source: Tradingview, Stone X

USD/RUB has been moving lower, however, the pair bounced off strong support at the 61.8% Fibonacci retracement from the January 2020 lows to the March 2020 highs.  If inflation comes in weaker from Russia next week, the pair could continue higher.   Also, don’t forget about the OPEC+ meeting next week.  As the USD/RUB has a high inverse correlation with oil, if OPEC+ decides to increase output, then value of crude oil should fall, and the price of USD/RUB should increase on the daily timeframe!

Learn more about forex trading opportunities.

 


StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.

City Index is a trademark of StoneX Financial Ltd.

The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.

© City Index 2024