Russia started a war that made a lot of noise and caused problems worldwide. From oil exploding prices to sell-off on stock or crypto markets, Russia caused enormous volatility. The USD/RUB currency pair is rising in the long term. However, that changed when the Russian Central Bank decided to step in.
Related blog: Is EUR/USD at the beginning of a giant uptrend?
The beginning of the sell-off
When Russia invaded Ukraine at the end of February this year, everybody, especially the stockholders, panicked. The Russian stock index fell rapidly while other indices and cryptocurrencies fell by several percent. This caused the Russian ruble to decline in value significantly. USD/RUB grew from 75 in the middle of February to around 150 USD/RUB in less than a month.
Then Central Bank of Russia decided it was time to start lowering interest rates, slowly bringing them from 20 percent to the current 9.5 percent. Some analysts expect the key rate to stay around 10 % in 2022 and continue to go south the next year. This will lead to a weaker ruble, but what about the US dollar? Well, the Federal Reserve is currently doing the opposite! US interest rates continue to rise, and it is expected to grow even more to bring inflation down.
Also related: Russian gas hit by force majeure
Theoretically speaking, a strong US dollar and a weak ruble should create a strong uptrend in USD/RUB. Looking at this currency pair from a technical perspective, it has not seen such a drastic price decline in more than 25 years. USD/RUB fell by around 66 % in just four months, and many traders are now eyeing this currency pair.
Technical analysis shows a crucial trend line and support that could stop this rapid downtrend. Moreover, the market bounced from a moving average (EMA200), and RSI is significantly oversold. That already caused a price pullback from 50 to almost 70 in a few weeks, and then it went back down. So is it still worth buying USD/RUB?
Now let’s move from a monthly to a daily timeframe to decide better. This currency pair showed some bullish signs by breaking the small trend line, and it is now possibly in the middle of creating a 123 reversal pattern or a double bottom. If the price doses not go below 48-50 and the market makes a higher low (above the price of 50), it might be a great sign of trend reversal.
If traders enter between 50-60 USD/RUB with low leverage and the price will not go below 50, there is a massive opportunity for profit. The first and most realistic profit target is a price of 75, but USD/RUB could also go to 95 in the next few months, if bulls arrive to the party.
The bottom line
If the interest rates in Russia continue to decline and rise in the United States, this could help the currency pair USD/RUB to grow in the long term. However, this has been the most substantial price decline of USD/RUB in more than 25 years, and at least a certain pullback upwards is very anticipated.