USD/RUB drops to 2-week lows near 65.50

The upbeat momentum surrounding the Russian Ruble remains unchanged so far this week and is now forging USD/RUB to drop to fresh 2-week lows in the mid-65.00s.

USD/RUB now focused on YTD lows in the 65.20/15 band

The pair remains under increasing downside pressure since last week’s peaks in the 66.50 area, coming down in tandem with the recovery in prices of the barrel of the European reference Brent crude, which has so far managed to retake the $67.00 mark.

In the meantime, the ongoing appreciation in RUB appears supported by the renewed better sentiment in the EM FX space pari passu with the correction lower in the greenback from recent YTD tops when measured by the US Dollar Index (DXY).

Later in the week, the usual weekly report on FX reserves held by the CBR is due tomorrow along with January’s Trade Balance figures.

What to look for around RUB

The ongoing moderate trend in inflation figure plus the economy expanding above estimates could prevent the CBR from hiking rates further in the near/medium term. The central bank sees inflation picking up pace in the next months, although consumer prices should drift to the bank’s 4% target at some point in H1 2020. That said, it appears the ‘pause mode’ in the CBR could be in place for longer than expected. Furthermore, 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). 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 retreating 0.14% at 65.49 and faces the next support at 65.16 (2019 low Feb.25) followed by 64.90 (monthly low Nov.22 2018) and finally 62.66 (200-week SMA). On the other hand, a breakout of 66.00 (55-day SMA) would open the door to 66.50 (monthly high Mar.8) and then 67.16 (high Feb.14).