Emerging market currencies have taken a hit against the US Dollar, as interest rate cuts dominated the currency space during the week. The latest in the interest rate cuts came from the Central Bank of Russia, which shaved 25bps off its benchmark interest rate. The interest rate now stands at 4.25%. The interest rate cut was in line with the expectations of analysts.
Also, daily currency sales will cease. The sales of foreign currencies by the CBR within the country have helped eased foreign currency scarcity and propped up the Rouble during record low oil prices but at the expense of the country’s currency reserves which have dropped from $574.2 billion to $570 billion.
In a statement last month, the Deputy Governor of the Central bank of Russia (CBR), Alexei Zabotkin had opened the door for yesterday’s rate cut by saying that there was “further room for monetary accommodation”. It is presently unclear if the next meeting will produce another rate cut or not.
The bank expects the economy to contract 9-10%, according to CBR Chief Elvira Nabiullina. She expects a gradual return of inflation to the 4% target.
Technical Outlook for USDRUB
The pair is trading in the range which has 70.611 as the floor, and 71.981 as the ceiling. Today’s price action completes the run from the floor to the roof. A break above this range could confront the 72.802 resistance, with 74.602 (38.2% Fibonacci retracement from the swing low of 10 January to the swing high of 18 March) as the next logical target.
On the flip side, a rejection at 71.981 could allow for a reciprocal return of price to the bottom of the range. A breakdown of this floor targets the 69.25 (61.8% Fibonacci support) level, with 68.661 and 68.039 remaining relevant as potential support levels down the road.
USDRUB Daily Chart