Will the Russian Ruble keep appreciating vs other currencies?

2022年5月30日

The truth is that the most likely answer is yes, the Ruble will keep going higher. Russia is a massive commodities exporter, from oil & gas, to wheat, and therefore there is a constant bid for its currency due to the natural demand for its resources. As Russia is hit by several sanctions, it is very hard for them to buy stuff from outside of Russia, and therefore even less money is flowing out of the country. The government has also imposed capital controls, and it is hard for its citizens to sell their currency for USD, EUR etc.

The Central bank also raised rates from 5% in 2021 up to 20% post invasion, and have now dropped rates to 11%. Even though that's still a pretty high number and inflation in Russia is much higher than 11%, however this rate is still much higher than what many countries are offering. A 9% cut in interest rates couldn't even bring the currency down, a major sign of strength.

However in my opinion the most important aspect is that Russia has very low debt and could take the hit, while most other countries can't raise rates without breaking everything. They also have significant amounts of Gold, and what remains to be seen is what happens to their FX reserves that have been frozen. If they totally lose these reserves then the currency could suffer, but for now it is possible that they get their reserves back. Forcing 'hostile' countries to pay them in Rubles isn't as important as people think, as they could have accepted payments in Euros for example, and then used that money to buy their own currency. This was mostly a power play and a statement that energy sanctions are futile.

Now in terms of TA, the Ruble got insanely oversold after having a huge breakdown (USDRUB breaking out), but when the dust settled, many people who were short were forced to cover as their brokers wouldn't allow them to trade the Ruble. Many accounts were probably blown up due to the whole sanctions, capital controls and so on, that made it very hard for traders to go long or short. As USDRUB started coming down, longs were getting crushed and everyone had to start closing their positions. The market became illiquid and unstable, and mainly damaged those betting against the Ruble.

At the moment USDRUB has gotten incredibly oversold, as it broke the S3 Yearly Pivot, as well as the S3 Monthly Pivot, and broke the 2020 Covid low, as well as the 2017-2018 lows. The bounce is mostly driven by technical reasons (taking out stops & being oversold), as well as the 3rd rate cut. However in terms of TA, it looks pretty likely that it is heading for 36$. The whole reversal from 160 all the way down here is still very bearish and an indication that lower prices are coming. The rejection at the diagonal resistance is pretty bearish, and the entire 2013-2015 rally / breakout could be reversed. In the short term the market could trade between 55 & 70, but in the long term it is going to go lower.

2022年7月18日

註釋

This trade went exceptionally well despite me being late, as the market went from 64 down to 51-52. However, now I see some slight issues with it, given that energy sales by Russia might be slowing down. Oil is going down; sanctions are around the corner, and Russia could cut down gas sales in Europe, meaning less money coming in. At the same time, their economy is under extreme pressure, and further rate cuts might be needed. Therefore it is an excellent time to take some profits and wait. Still believe 36 will eventually come, but for now, a further bounce could be coming.



Another reason why I am concerned about the trade is because USDTRUB is still relatively high, while USDRUB has gone lower. There was a 10% difference between the two at some point, yet there is a lot less RUB sitting on Binance than elsewhere. Maybe I am wrong, and it is easy to deposit RUB on Binance. However, I kind of doubt it. Perhaps it's because the supply of Tether has come down a lot, and that's why it is harder to exit from RUB.