The recent rally in the U.S. dollar may be ready for a return to the downside and this is coinciding with key resistance against the Ruble, so a bounce may be in order for the Russian currency.
The Russian economy saw a loss of -8% in the second quarter, whilst the unemployment rate continues to rise to 6.4%. Despite these numbers the country’s inflation rate continues to rise from 2.3% in April to 3.5% now. The bank’s inflation target is 4%, whilst interest rates have fallen from 6.5% to 4.25% in the last year. The threat of inflation moving beyond the 4% target will likely put a lid on the USDRUB if the central bank are forced to act.
Russian politicians backed a plan on Tuesday to increase taxes for some oil and mining and companies. Moscow is looking for support in the midst of lower oil prices. The plan is expected to raise 340 billion roubles ($4.5 billion) a year. The government also backed tax breaks for oilfields in Siberia, which should benefit Rosneft.
President Putin urged Western countries to abandon their sanctions against Russia in order to boost the world economy, in his annual UN address. The U.S. election is also only a month away, which should bring volatility in the Ruble around the result.
USDRUB has been trading in a tight channel since the June lows at 68.00. Price now trades at the resistance line of the price channel which also coincides with overhead resistance at 77.50. The price would need a daily close above there to see further gains. If the resistance holds then price could seek to break the lower level of the channel and target the 74.00 level.
