USD/RUB forecast: Will China come to the rescue as ruble collapses?

The USD/RUB remained at elevated levels as investors continued to focus on the ongoing crisis in Russia. The pair is trading at 106.20, which is a few points below the all-time high of 109.56. It has risen by more than 44% from the lowest level this year.

Russian ruble collapses

The Russian rouble has been under intense pressure in the past few weeks as investors continue focusing on the ongoing crisis in Europe. The currency has fallen to an all-time low and some analysts believe that the worse is yet to come.

European, American, and some Asian countries have responded in a tougher manner than President Putin expected. They have disconnected Russia from the SWIFT network and announced sanctions to the country’s biggest banks. Additionally, they have announced sanctions on some of the most elite individuals in China.

The biggest sanctions are on the Bank of Russia, which holds about $630 billion of the country’s total cash. In a statement, western countries announced that they will block about half of the cash held by the bank.

This means that it will be difficult for the BOR to intervene in the market by buying rubles using foreign currencies. As a result, the bank announced that it would hike interest rates to 20% in a bid to make savings more interesting. It also closed the stock market in a bid to prevent unbearable losses.

And, it keeps getting worse for Russia. This week, two of the biggest shipping companies – Maersk and Mediterranean – announced that they will avoid the country. And overnight, MSCI said that it will remove uninvestable Russian stocks from its emerging market indices. Also, Fitch downgraded Russian debt to junk.

Still, there are some possible ways that the BOR can handle the crisis. For one, it could do a currency swap agreement with a friendly country like China. Just recently, we saw the Turkish lira do well when Turkey made a currency swap with the UAE.

USD/RUB forecast

The daily chart shows that the USD/RUB has been in a strong bullish trend and is currently hovering near its all-time high. Subsequently, the pair has moved above all moving averages and is along the upper side of the Bollinger Bands. Additionally, its oscillators like the Relative Strength Index (RSI) and Stochastics have kept rising.

Therefore, there is a likelihood that the pair will continue soaring as bulls target the next key resistance level at 110. But at the same time, a retreat cannot be ruled out in case China decides to help Moscow.