In early June, the Russian ruble weakened to 82.5 per US dollar, reaching its lowest level in a year. This comes amid continued pressure on the ruble due to Russia’s unsustainable budget deficit and persistently low energy prices. New data from the Ministry of Finance suggests that the federal government recorded a budget deficit of 3.4 trillion rubles in the first five months of the year, which is a historically high figure. Such an event is associated with a sharp increase in military spending and a significant decrease in energy revenues. In response, the Ministry of Finance announced the sale of four tons of gold and 2.6 billion yuan from the National Welfare Fund to finance the budget deficit. Low foreign exchange inflows have also led to the Kremlin selling foreign exchange.
USD/RUB Weekly Forecast June 12 — 16, 2023
At its June meeting, the Central Bank of Russia decided to leave the key interest rate unchanged at 7.5%, which was in line with market expectations and was the sixth consecutive unchanged decision. However, the bank noted an increasing likelihood of rate hikes at upcoming meetings due to rising inflationary risks.
The central bank pointed to an expected increase in inflation as the base effects from the hostilities begin to fade and consumer demand recovers from last year’s slump. The impact of the depreciation of the ruble also continues to have an impact. High inflationary expectations are associated with increased military spending and lower energy prices, leading to a record high federal budget deficit and putting pressure on the ruble, as well as increasing bond yields.
In addition, production costs are rising as a result of military mobilization, causing workforce reductions and pressure on companies’ capacities. Politicians also noted a higher growth rate of economic activity than expected. The Central Bank of Russia predicts that this year inflation will range from 4.5% to 6.5%, and then stabilize at 4%.
Currency pair Dollar Ruble USD/RUB completes the trading week near the level of 82.44 Rubles per US Dollar. The pair continues to move within the growth and bullish channel. Moving averages indicate a bullish trend. Prices are again testing the area between the signal lines, which indicates pressure from buyers of the US dollar and a likely continuation of the pair’s growth already from these levels. In the current trading week June 12 — 16, 202 we should expect an attempt to develop a correction and test the support area near the level of 77.65. Where should we expect a rebound upwards and continued growth of the Dollar against the Russian Ruble with a target above the level of 102.55.
An additional signal in favor of the rise of the Dollar/Ruble pair will be a rebound from the lower border of the bullish channel. The second signal will be a rebound from the support line on the relative strength index (RSI). Cancellation of the growth option for the Dollar/Ruble pair will be a fall and a breakdown of the 73.45 area. This will indicate a breakdown of the support level and a continued fall in the US Dollar against the Russian Ruble with a target below 67.05. It is worth waiting for confirmation of the growth in the pair with the breakdown of the resistance area and the closing of the USD/RUB quotes above the level of 85.65.
USD/RUB Weekly Forecast June 12 — 16, 2023 suggests an attempt to test the support area near the level of 77.65. Where should we expect a rebound upwards and the continuation of the growth of the dollar to the area above the level of 102.55. An additional signal in favor of this option will be a rebound from the bullish trend line on the relative strength index (RSI). Cancellation of the growth option for the dollar in the current trading week will be a fall and a breakdown of the area of 73.45. Which will indicate the continued decline of the pair with the target at the level of 67.05.
