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  • RUB loses ground for another session, near 64.80 vs. USD.
  • Weekly upside failed ahead of the 55-day SMA near 65.00.
  • CBR kept the key rate on hold at 7.75% at today’s meeting.

The Russian currency is prolonging the weekly down move today and is pushing USD/RUB to the area of session tops in the 64.85/90 band, just lo lose momentum afterwards.

USD/RUB off highs on steady CBR

After testing the 64.85/90 band, the pair faced some selling pressure following the decision of the Russian central bank (CBR) to keep the key interest rate unchanged at 7.75%.

The CBR noted that inflation pressures have subsided this month following last month’s peaks, adding that consumer prices are now running below the bank’s projections.

The central bank also highlighted the success of the rate hikes seen in September and December of last year in curbing pro-inflationary risks. The CBR still sees the CPI coming back to the 4% target in H1 2020.

Furthermore, the CBR signalled the probability of rate cuts at some point in the second half of the current year.

What to look for around RUB

The ongoing down trend in inflation plus the economy expanding above estimates could not only prevent the CBR from hiking rates further this year but it could also spark an easing cycle starting as early as later this year, according to the latest statement from the central bank. In the meantime, the carry-trade remains supportive of RUB along with expected higher oil prices (despite RUB seems to have decoupled from oil dynamics as of late) and positioning. On the negative side, the spectre of further sanctions on Russian citizens or the economy as well as geopolitical jitters carries the potential to undermine occasional upside momentum in RUB.

USD/RUB levels to watch

At the moment the pair is gaining 0.17% at 64.75 and faces the next hurdle at 64.98 (high Apr.25) seconded by 65.84 (high Apr.1) and then 66.22 (200-day SMA). On the downside, a breakdown of 64.12 (10-day SMA) would allow for a test of 63.66 (low Apr.23) and finally 63.61 (2019 low Mar.21).