Russian Ruble still appears vulnerable at all-time low levels, eyes 37.17

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Struggling Russia Could Blink First On Trade Sanctions
Struggling Russia Could Blink First On Trade Sanctions

Struggling Russia Could Blink First On Trade Sanctions

Russian currency nosedived to all-time low levels yesterday against the greenback, hence rallying USD/RUR to 36.5424, as Russia recognized Crimea as an independent state in sheer confrontation with the West. The pair is expected to test the long term trendline resistance in near future.

Technical Analysis

As of this writing, USD/RUR is being traded around 36.5424. The pair is likely to face immediate hurdle near 36.70, the high of the yesterday, ahead of 37.17 which is the channel resistance of the upward slope. A break and daily closing above the channel resistance could accelerate the bullish momentum, opening doors for fresh highs above 37.50.

On the downside, the pair is expected to find support near 36.15, the low of the yesterday, before 34.51 which is the swing low of the previous wave. A break below 34.51 could push the pair towards 32.00 handle that however appears a less likely scenario.

Russian Hostility

Russian aggression on Crimea has resulted into the worst crisis since the cold war. The US and the European countries had already warned Moscow that if the country recognized Crimea, then it would have to face more sanctions from the western countries. It appears that Putin didn’t pay any heed towards the warnings. So investors are fleeing Russian stocks and Russian Ruble, causing huge selling pressure in the country’s stock market and currency. Some analysts believe if the situation aggravates, then a high up to 40.00 or even above is very likely in USD/RUR.

US Data

A number of important economic reports about the US economy are scheduled for release today and tomorrow. The US labor department will release the inflation data today. Analysts have predicted a decline in the inflation to 1.2% as compared to 1.6% in the same duration of the year before. The Consumer Price Index (CPI) ex food & energy prices, which is considered more reliable measure for inflation, remained steady at 1.6% in February as compared to the same reading in the February 2013, according to the forecast. Generally, high inflation is considered good for the developed economies. So if, today, the US data comes better than expectations, then it will be considered bullish for USD/RUR and vice versa.

Fed Monetary Policy Outlook

Tomorrow the US central bank is due to announce its decision on the overnight lending rate as well as the pace of the asset purchase program worth $65 billion a month. According to the unanimous forecast of different economists, the Federal Reserve is likely to keep the benchmark interest rate steady at 0.25% while analysts differ in view about the Fed decision on the Quantitative Easing (QE). Some analysts think that the Fed might reduce the QE by $10 billion to $55 billion tomorrow after the surprise increase in the previous month’s nonfarm payrolls. If we get tapering decision tomorrow, it will be very bullish for USD/RUR. So in a nutshell, more highs are very likely in USD/RUR, buying the pair on dips would definitely be a good strategy in short term.

To contact the writer of this story: Usman Ahmed at usman@forexminute.com