It’s been a quiet start to the week among the major currencies, with many traders turning their eyes toward Fedspeak and European data later in the week as the next catalyst for markets. That said, there are a number of high-impact announcements out of major emerging markets countries that could steal the headlines this week. By midweek, the market will get its most up-to-date look at the economies of Mexico, China, South Africa, and Russia, suggesting that EM currencies may provide more actionable trading opportunities than their developed world counterparts this week.
Will Ukraine Elections Stop USD/RUB Selloff?
Perhaps more than any other country, the market will be focusing on Russia. Like the countries mentioned below, high-impact economic reports, including Industrial Production and Retail Sales are on tap in Russia, but geopolitical concerns should remain the primary driver of trade this week. The latest news suggests that Russian President Putin has ordered troops near the Ukrainian border to withdrawal (again) ahead of Ukraine’s critical Presidential election on Saturday, though this pullback has not been verified by either NATO or the Pentagon.
Given the proximity of the elections and the ongoing violence, the situation remains highly volatile and traders are pricing in a premium for this political uncertainty. If the elections go off without any major hitches, we may see a risk-on tone as traders grow more confident, whereas any abnormalities or the prospect of further violence could keep the lid on risk-based trades heading into next week.
Looking specifically to the USD/RUB, the pair has ratcheted lower over the last few weeks on falling US yields and fading headlines out of Ukraine. On a technical basis, the pair is currently trading at a 4-month low after breaking below its symmetrical triangle pattern two weeks ago. The RSI remains in a clear downtrend, and the MACD is trending lower below its signal line and the “0” level, showing that the bears remain firmly in control as we go to press.
From here, the next levels of support to watch are the 61.8% Fibonacci retracement at 34.15, the 200-day MA at 33.83, and the 78.6% Fibonacci retracement at 33.41. Meanwhile, previous support at 34.90 may provide resistance on any bounces, and only a conclusive break back above that level would shift the near-term bias to the topside moving forward.
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