- RUB trims earlier losses and moves to the 64.60 area vs. USD.
- Upside in spot looks limited near 65.00, 55-day SMA.
- US PCE, Personal Income/Spending next of relevance in the docket.
USD/RUB has returned to the 64.30 area today after the earlier bullish attempt run out of steam in the 64.80/85 band.
USD/RUB upside capped by 55-day SMA below 65.00
The rebound from recent lows in the 63.70/60 band have met a tough resistance in the 65.00 neighbourhood, coincident with the key 55-day SMA.
RUB gave away part of the monthly gains in response to the sell off in crude oil prices in the second half of last week. It is worth noting that prices of the European reference Brent crude dropped to multi-day lows near the $71.00 mark per barrel earlier today, managing to regain some composure soon afterwards.
In the meantime, investors continue to digest Friday’s decision by the CBR to keep the key rate on hold, although at the same time opening the door for rate cuts in the second half of the current year. The CBR would resume its easing cycle as it now sees the inflation returning to the bank’s 4% target in the near term after the impact of the VAT raise was lower than forecasted.
What to look for around RUB
The ongoing down trend in inflation plus the economy expanding above estimates could prompt the central bank (CBR) to restart its easing cycle as early as Q3/Q4 2019, according to the latest statement from the central bank. In the meantime, rising appetite for Russian assets, carry-trade, expected higher oil prices, record-high speculative positioning and diminishing chances of sanctions are all sustaining the positive prospects around RUB.
USD/RUB levels to watch
At the moment the pair is gaining 0.09% at 64.65 and faces the next hurdle at 64.98 (high Apr.25) seconded by 65.53 (100-day SMA) and then 65.84 (high Apr.1). On the downside, a breakdown of 64.42 (21-day SMA) would allow for a test of 63.66 (low Apr.23) and finally 63.61 (2019 low Mar.21).
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