Brent oil is currently on a bullish trend, facing resistance near $84 and supported by the 200-day EMA. Breaking above this level could lead to a climb towards $90. Short-term support is observed around $80, backed by the 50-day EMA. As summer approaches and travel increases, crude oil tends to benefit from seasonal patterns. Despite temporary setbacks, buying...
USD/RUB and OIL: trader's treasure
2020-06-11 • Updated
The current president assumed power in Russia in 2000 and stayed in power de facto during these 20 years. Leaving aside political questions, let’s focus on the economy and try to find a correlation between the price of oil and the price of the USD against the RUB.
Until 2015, while the oil price was above $20 per barrel and kept rising sometimes to cosmic highs like $140, the USD/RUB has been trading stable at 30. Eventually, the WTI oil price lost more than half its value dropping from $100 to $40. Simultaneously, the USD/RUB gained more than 100% flying from 30 to 70. Interestingly enough, both the oil price and the USD/RUB are now where they were in 2015 right before the “sudden” change. In any case, that was the end of Russia’s “gold era” of sky-high oil prices, and hence the RUB got substantially marked down.
The recent Russia-Saudi oil price war made the USD/RUB take yet a higher baseline level. The most recent spike in the USD/RUB is exactly where the WTI dropped to $20 (and even below 0 in some markets). In fact, it is visible that the shape of the chart after 2015 (marked by the green vertical line) is almost perfectly inverted between the oil price and the USD/RUB.
That’s why, specifically with the USD/RUB, one of the main fundamental factors defining this currency pair is the oil price. The higher it is – the better for the oil-exporting Russian economy, and hence, the stronger (or at least more stable) the RUB may be. This comes as a big facilitator to predict the USD/RUB: just keep your hand on the pulse of the oil price, and you will know where the USD/RUB goes. For a trader, what can be more convenient?
The strategic outlook for the USD/RUB is an uptrend in any case. That is dictated by the supremacy of the American economy against the Russian – the latter simply cannot stand the competition and is doomed to lose, just as any developing economy with the currencies such as the MXN, BRL, and TRY. As we can see on the chart above, even after a bullish rally, an uptrend was rarely challenged – rather, tested, at times. For example, the years 2000-2015 can be taken as a period of a relative stability of the USD/RUB at or below the resistance of 30, with 2003-2008 showing a slow decline. That was ended with the mentioned plunge in the oil price that pushed the USD/RUB far beyond 30.
The weekly chart of USD/RUB below presents a volatile picture with an underlying upward trajectory. While the price may keep going down for a while, it is unlikely it would break the larger uptrend. More probably, it will come to test the uptrend’s bottom at 62-63 and will get back up to 69-70.
In any case, fundamentally speaking, there is little ground to expect the RUB to gain value against the USD in the long term. At maximum, it will stay stable where it is now. That should serve as an ideal background for trading that may rely on this guaranteed fundamentality. Hence, unless the oil price makes a substantial drop once again, one may safely buy the USD/RUB to see it grow in a few months or even weeks.
Bearish Scenario: Sales below 78.99 with TP1: 77.93, TP2: 77.45, and upon its breakout TP3: 76.56 and TP4: 75.70 Bullish Scenario: Purchases above 78.00 (wait for a pullback to this area) with TP1: 1679.00 (uncovered POC*), TP2: 79.33, and TP3: 79.66 intraday
Bearish Scenario: Sales below 80.00 with TP1: 79.34, TP2: 78.94, TP3: 78.55, and 78.00 Bullish Scenario: Buys above 78.00 (wait for a retracement to the zone) with TP: 79.34 TP2: 80.00, and TP3: 81.00
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