Economic contraction in Q3 2016 turns Rouble weak
The Greenback strengthened against all the major currencies in the past two months, mainly due to the Fed’s statement indicating the possibility of up to three rate hikes in 2017, instead of two expected by the market. However, the US dollar was unable to gain ground against the Russian Rouble. In fact, it was the other way round. Since December 1st , the USD/RUB has fallen by about 400 pips to reach a low of 60.1088.
The decline of the USD/RUB pair was aided by the agreement between OPEC and other oil producing countries to limit the production of crude from the beginning of January 2017. However, we may see a recovery in the Greenback in the beginning of 2017 due to the reasons mentioned below.
The Russian Ministry of Economic Development expects the industrial production to rise modestly by 1.5% in 2017. Even though this is a positive development considering two years of negative growth of 3%, still, it would not be sufficient enough to impress the investors. The investors would become optimistic about the growth prospects of Russia only when the EU and US’ sanctions – slapped after the country meddled in Ukraine – are lifted. It can be remembered that the Russian economy contracted 0.6% y-o-y in the third-quarter of 2016.
The Energy Information Administration reported an increase in the crude oil inventories by 614,000 barrels as of December 24th . On the other hand, the market was expecting the inventories to decline by 1.3 million barrels. An increase in the oil inventories is expected to put pressure on the price of crude oil, which is one of the major export revenue earners of Russia.
On the contrary, the recent economic data indicates that the US economy continues to perform reasonably well. Last Thursday, the Department of Labor reported unemployment claims of 265,000 for the week ended December 24th . It was far less than the 277,000 claims anticipated by analysts. Furthermore, the Trump’s inflationary policies coupled with Fed rate hikes are expected to keep the US dollar stronger in 2017. Indeed, the Greenback showed a bit of weakness in the second-half of December. However, analysts attribute most of the weakness to the holiday season.
Thus, fundamentally, the USD/RUB pair is expected to turn bullish in the short-term. The historic price chart reveals the consolidation of USD/RUB pair around 60.80 levels. The MACD is rising and the stochastic oscillator is ascending firmly in the bullish zone. This indicates that the currency pair has a high probability of turning bullish in the short-term.
In order to trade in the direction of the forecasted trend, a currency trader should go long near 61, with a stop loss order below 60.25. If the currency pair rises as per the forecast, then the profit can be booked near 63.20.
A binary trader can bet on the rise of the USD/RUB pair by picking up a high or above contract from a binary broker. Before investing, a trader should ensure that the USD/RUB pair is trading near 61 and the contract remains valid for a period of one week.
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