USD/RUB forecast after the hawkish Russia Central Bank decision

By: Crispus Nyaga
Crispus Nyaga
Crispus is an active trader, where he is followed and copied at Capital.com. He lives in Nairobi with his… read more.
on Jul 23, 2021
  • The USD/RUB pair declined sharply after the latest Russia Central Bank decision.
  • The bank hiked interest rates to 6.50%, the biggest jump since 2014.
  • This decision came as Russia’s inflation rose above the bank’s 4.0%.

The USD/RUB price declined to the lowest level since July 6 after the latest Central Bank of Russia interest rate decision. The pair fell to 75.60, which was about 2.58% below the highest level this month.

Bank of Russia interest rate decision

The Russian Central Bank concluded its monetary policy meeting and boosted its main interest rate in line with expectations. The bank raised its overall interest rate from 5.50% to 6.50%, the sharpest increase since 2014. This was also the fourth time that the bank has hiked rates this year, making it the most hawkish central bank in the world. 

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This decision happened as Russia’s inflation kept rising. Recent data showed that the country’s headline consumer price index rose to 6.5% in June, the highest it has been since 2016. It now expects that inflation will end the year between 5.7% to 6.2%, which is higher than the bank’s target of 4%. 

Inflation is soaring globally as a sharp increase in commodity prices converges with the logjam in the high seas and key ports. An extremely high inflation rate usually lowers the cost of living since the same amount of money buys less product. As a result, central banks tend to hike rates to tame the situation. In the statement, the bank said:

“Inflationary pressures may originate from a stronger-than-expected decline in households’ propensity to save, propelled by the combination of low-interest rates and growing prices.”

The USD/RUB also declined as the prices of crude oil jumped back. Brent rose to more than $74 a barrel while West Texas Intermediate (WTI) rose to $72. This is a notable increase from where the price was early this week as fears of the new Delta variant wave continued.

USD/RUB technical analysis

USD/RUB

The 4H chart shows that the USD/RUB pair has been in a sharp downward trend recently. The pair managed to move below the important support at 73.93, which was the lowest level in July. This price was also the neckline of the double top pattern. It also moved below the 25-day and 50-day moving averages (MA) while the Relative Strength Index (RSI) formed a bearish divergence pattern. Therefore, the pair will likely continue falling as bears target the next key support at 73.20.

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