USD/RUB slips to 5-week low after the Bank of Russia rate hike

Written by: Crispus Nyaga
April 23, 2021
  • The USD/RUB declined after the Bank of Russia hiked rates for the second straight month.
  • The decision came after the US announced fresh sanctions on Russia.
  • The pair has formed a head and shoulders pattern on the 4H chart.

The USD/RUB price declined for the third consecutive day after the latest Bank of Russia (BOR) interest rate decision. It fell to 74.92, which is more than 3% below last week’s high of 78.00.

USD/RUB
USD/RUB price action

Bank of Russia decision

The BOR concluded its monetary policy meeting on Friday. The bank hiked interest rates by 75 basis points to 5%. This was higher than what analyst at most forex brokers were expecting. It was also the second consecutive month that the central bank has hiked interest rates.

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The Russian interest rate decision came at a difficult time for Moscow. A weaker ruble and higher oil prices have pushed inflation higher and analysts expect that this trend will continue. Most analysts believe that the headline CPI will surge to above 4% this year.

At the same time, geopolitical tensions have continued. This week, the US slapped the country with new sanctions that targeted the sovereign debt market. The Biden administration has said that it will impose further sanctions if Alexei Navalny medical condition continues to worsen. Thousands of Russians have also turned to the street to protest his arrest and detention. 

These challenges could put a strain on the country’s economic recovery. The economy contracted by 3.1% in 2020 and is expected to grow by between 3% and 4% this year. Therefore, this growth could be impacted by the relatively higher rates.

Later today, the USD/RUB pair will react to the latest data from the United States. Yesterday, data showed that initial jobless claims declined to a post-pandemic low of 574,000, which is lower than the previous week’s 586,000. 

Later today, the country will publish the latest new home sales numbers while Markit will deliver the latest flash manufacturing and services PMI numbers. The country will also release new home sales data after yesterday’s disappointing existing home sales data.

USD/RUB technical forecast

USD/RUB
USD/RUB technical chart

The daily chart shows that the USD/RUB pair rose to a high of 78.03 last week. This week, however, the pair has dropped after the latest US sanctions numbers. The pair is slightly below the 38.2% Fibonacci retracement level. It has also moved below the 25-day moving average. 

The Relative Strength Index (RSI) has dropped to 46. It also seems to be forming a head and shoulders pattern. Therefore, the pair may keep falling as bears target the 50% retracement at 74.4932. However, a jump above the 38.2% retracement at 76 will invalidate the bearish thesis.