The Russian ruble is back. The USD/RUB exchange rate has retreated from last year’s high of 114.45 to the current 98.30, its lowest level since November 14. It has also formed a highly bearish chart pattern, pointing to more downside later this year.
USD/RUB forecast as a double-top pattern
The daily chart shows that the USD/RUB exchange rate rose to a high of 114.48 in 2024 as the Russian economy remained on edge.
It has now reversed some of those gains and dropped to a low of 98. The pair has formed a double-top chart pattern, pointing to a strong pullback. This pattern comprises two peaks and a neckline at 98.57. It has already dropped below the neckline and retested it, a continuation sign.
The pair’s neckline was at the 50% Fibonacci Retracement level. It has dropped below the 50-day and 100-day Exponential Moving Averages (EMA), which are about to form a bearish crossover.
The Relative Strength Index (RSI) and the MACD indicators have continued falling, a sign that the downtrend is gaining traction.
Therefore, the path of the least resistance for the USD/RUB pair is bearish, with the next point to watch being the 61.8% retracement level at 94.65. More downside from that point will lead to further selloff to the psychological point at 90. Conversely, a move above the 1he 50-day moving average will invalidate the bearish view.
Why the Russian ruble is soaring
There are a few reasons why the Russian ruble has gained against the US dollar. First, it has become a popular carry trade currency as the divergence between the United States and Russia continues.
The Federal Reserve has started to cut interest rates in a bid to supercharge the economy. It has slashed rates by 1% since last year, and officials expect to deliver two cuts later in 2025.
On the other hand, the Central Bank of Russia has embraced a highly hawkish tone in the past few months as the economy has done well. It raised interest rates to 21% in December, and analysts expect it to continue in January. It moved them from 7.50% in 2022.
The Russian central bank’s hikes have created a good carry trade opportunity and demand for the currency. A carry trade is a situation where investors borrow a low-interest-rate currency and then invests in high rate ones.
Elevated crude oil and natural gas prices have also supported the Russian ruble. Brent, the global benchmark, has risen to $76, while West Texas Intermediate (WTI) has increased to $74. Russia benefits from higher oil prices because it is the biggest foreign exchange earner.
Natural gas prices have also jumped to the highest level in months amid elevated demand from European countries. All these factors have contributed to the ongoing Russian ruble surge this year.The Russian ruble has gained after Donald Trump’s win, which raised the odds that the United States will scale back tariffs on the country.
The post USD/RUB forecast: here’s why the Russian ruble is soaring appeared first on Invezz