Inflation has been a huge issue for countries across the globe.
The cost of living has significantly increased for many major and minor economies with the United States having one of the largest inflation rates to date. This inflation rates have skyrocketed from 2020 for most western countries due to several factors... one mainly due to the fiscal stimulus we saw which significantly increased consumer spending.
Now we're at a point of crisis where central banks now look to cool the economy through rising interest rates which will have significant impact on peoples borrowing/ credit which includes financed cars and mortgages being hit.
We can see in the infographic above that inflation rates are rising in most countries bar China and Japan.
USD/RUB Fundamental Summary
Throughout our analysis we'll be focusing on the exotic currency pair USD/RUB, a fairly volatile currency pair due to lots of uncertainty around the war in Ukraine and Russia's influence on energy.
The economic and fundamental data over the past few weeks is showing weakening signs for the US economy, but on the flip side for Russia we're seeing strong fundamental data.
This divergence in data creates a bearish stance on USD/RUB with all the major indicators showing a downwards trajectory.
USD/RUB Macro Currency Strength Meter
The Macro Currency Strength Meter is our main influencing factor which digests a bunch of economic data reports from the selected countries and plots it in an easy to digest graph which updates on a weekly basis.
In this case we can see over the past 2 months that US data has started from strong and ended on a weaker economic data perspective.
On the flip side the RUB has shown weakness a few months ago but now shows a very strong bullish trajectory.
This shows that fundamentally focusing on a USDRUB bearish move is logical, now it's time to understand what the other fundamental indicators are suggesting and making sure that aligns with any technical analysis you may have.
USD/RUB GDP Differentials
The GDP differentials are currently showing bearish signs for the US, the steep dip in growth rates for the United States compared to the flattening rates for Russia show overall United States may look to be outpaced by Russia in the coming years.
This shows how the GDP growth rates are potentially suggesting a bearish move is expected on USDRUB similar to when we saw rates dip between 2009-13 which saw USDRUB drop over this period.
Overall, this agrees with the currency strength meter direction we previously saw.
USD/RUB Trade Analysis (Imports/Exports)
Gold is a huge export for Russia which is why we've included it within the analysis, overall we can see a fairly similar trend over the past few months since April where Gold prices have fallen and USDRUB has followed...
In this case we can see the dip in gold prices suggesting USDRUB should follow suit soon...
What will be interesting to see is whether Gold continues to drop as inflation rises.
Crude oil is another commodity across both US and Russia which has high impact on the value of currencies. In this case we can see that the prices of oil had a huge bullish run over the past few years and we're now seeing oil prices fall.
This fall in prices has somewhat helped many consumers with fuel prices, however, we can see over the past year crude oil actually has a somewhat negative correlation against USDRUB.
When prices of Crude oil rise we can see the price of USDRUB drop and vice versa.
In this case if Oil prices were to rise again then we may see a dip in USDRUB.
MOEX Russia Stock market has had huge impact over the past year.
We can see since Feb 2022 when the war started on Ukraine the stock market in Russia tanked.
This had a negative correlation against USDRUB, as MOEX increase, USDRUB tends to fall and vice versa. The most recent data has shown the MOEX slightly recovering from its most recent lows... the question is now whether USDRUB follows the correlation and will it dip in value..
USD/RUB Interest Rate Differentials
The interest rate differentials have been in a negative differential for a long period of time.
This is due to the United States having to reduce their interest rates since the financial crisis, comparing this to a more exotic economy like Russia which has relatively much higher interest rates.
Currently the negative differentials suggests that USDRUB is looking bearish but we can't use this indicator alone, we must make sure other fundamental indicators are aligned.
USD/RUB Hedge Fund Positions
The COT report is showing that the hedge funds have been buying both the USD and RUB over the past few months.
This creates a negative differential as this is saying that hedge funds have more long positions on RUB compared to USD which is a potentially bearish sign...
What would make this even stronger is if the open interest of USD the blue line dipped below zero, this would show that hedge funds have in total more short positions than long on USD... one to watch out for.
USD/RUB Technical Analysis
As of 11:16am BST, on average currency pairs with USD have shown to be decreasing 0.14% against the U.S. dollar. On the other side, currency pairs with RUB have shown to be decreasing by 1.81% against the Russian Rouble.
From a technical perspective, RUB is showing a weaker price action strength versus the USD. See all Technical Currency Strength Scores below:
USD/RUB Price Analysis
USDRUB started off in 2022 with very strong bullish price movement, however, since the war in Ukraine has gone on the strength of the RUB has increased causing the USDRUB exchange rate to tank.
We're now seeing prices of USDRUB congest within a price range....
The question is now whether the prices breaks downwards and continues with its downwards trend we're seeing in the past few months.
I would be watching out for any technical signs in the coming weeks for a bearish pattern as this seems to be the trend and fundamental consensus.