CBR Hikes Rates; Sends USD/RUB to 4-week lows As Carry Trade Opportunity Sets In

The Central Bank of Russia (CBR) has hiked its key interest rate by 50bps to 5.00%, in a hawkish move that beat the market expectation of a 25bps hike.

Citing higher inflationary pressures and expectations of a return to the CBR’s inflationary target in 2022, the CBR took action to tighten policy. This move has forced the USD/RUB to trade lower for the third session in a row. The CBR noted that the recovery of domestic demand was putting inflationary pressures on the economy, hence the rate hike. The apex bank also left the door open for future rate hikes as it strives to achieve the 2022 target for inflation.

This move takes the interest differential betwee the two currencies in the pair higher, bringing up carrt trade opportunity.

Technical Outlook for USD/RUB

The USD/RUB is close to hitting support at 74.520. Price needs to break this support to target the price projection point. The 74.520 support level acts as the neckline for the head and shoulders pattern. But if there is a decline below this area, the price move brings 73.919 into the picture as the endpoint of the measured move, with 72.802 forming an additional target to the south. 

On the other hand, a bounce off the endpoint of the measured move from the head and shoulders pattern at 74.52 allows bulls to retest the 75.487 resistance. An advance above this level brings 75.974 into the picture, along with 76.511. A further barrier to the north rests at 77.582, which is where the head of the pattern rests. 

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USD/RUB Daily Chart

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