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  • USD/RUB moves higher, flirts with multi-day tops.
  • US sanctions, lower oil prices weigh on RUB.
  • US inflation figures next of relevance in the calendar.

The Russian currency is losing ground in tandem with the rest of its EM peers during the first half of the week and is now pushing USD/RUB to new multi-day highs around 65.70.

USD/RUB looks to trade, sanctions

Spot is advancing further today, regaining upside traction after last week’s lows in the 65.00 neighbourhood, always on the back of increasing selling pressure hitting RUB.

In fact, the Russian currency has given away part of the gains recorded in the first months of the year after the White House announced another round of sanctions earlier in the month.

Also undermining further RUB strength, the ongoing US-China trade conflict continues to cast shadows over global growth prospects and fuels further the sentiment towards the safe havens.

In addition, prices of the barrel of the European reference Brent crude have been losing ground at quite a moderate pace since mid-July and have also added downside pressure to the Rouble.

Data wise in the Russian docket, Industrial Production figures are due on Thursday and July’s Producer Prices are up on Friday.

What to look for around RUB

Another round of US sanctions against Russia based on the use of chemical weapons has been weighing on RUB since the start of the month, taking the currency to fresh 5-month lows beyond the 66.00 mark vs. the Greenback. On the more domestic scenario, declining inflation and growth running below the expected path appears supportive of the easing cycle already triggered by the CBR. In addition, Governor E.Nabiulina expects the economy to reach neutral rates at some point in mid-2020 and inflation to hit the bank’s 4% target early next year. On the positives for RUB, the economy looks firm and healthy, while the increasing demand for domestic debt (OFZ) also collaborates with the upbeat outlook for the currency. Additionally, carry-trade and potential extra inflows into the EM universe in response to looser monetary conditions in the euro area and the US should also provide support to RUB. On the other hand, investors remain vigilant on the impact of sanctions, while stretched speculative positioning (longs close to record high levels) could also hurt the mood in the Rouble.

USD/RUB levels to watch

At the moment the pair is gaining 0.23% at 65.59 and faces the next up barrier at 66.21 (monthly high Aug.6) seconded by 66.50 (monthly high Mar.8) and then 67.16 (monthly high Feb.14). On the other hand, a breach of 65.09 (200-day SMA) would open the door to 64.23 (100-day SMA) and finally 63.99 (high Jul.8).