USD/RUB: Here’s the path of least resistance for the Russian ruble

The USD/RUB exchange rate rally continued as the US dollar index comeback gained steam. The pair surged to a high of 94.36, the highest level since March 25th last year. It has surged by more than 86% from the lowest level in 2022.

Russian economy improving

The USD/RUB rally gained steam even after a series of positive economic numbers from Russia. In a report, the country’s statistics agency showed that retail sales jumped from 9.3% in May to 10% in June, higher than the median estimate of 9.5%.

Another report showed that the real wage growth expanded by 13.3% in May after growing by 10.4% in the previous month. Again, this increase was better than median estimate of 10.3%. 

Further, the report revealed that the country’s unemployment rate dropped from 3.2% to 3.1% while the economy expanded by 5.3% in May. These numbers mean that the Russian economy is doing well.

Meanwhile, Russia is benefiting from the rising crude oil and natural gas prices. Brent, the international benchmark, rose to $83 while West Texas Intermediate (WTI) rose to $80. Russian urals have risen to above $60. Russia benefits when higher oil prices are rising since it is one of the biggest exporters in the world.

The USD/RUB price also soared because of the strength of the US dollar index. The DXY index rose by 22 basis points on Wednesday to $102.30. It rose after ADP published encouraging jobs numbers. The report showed that non-farm payrolls (NFP) rose by 324k in July, better than the median estimate of 189k. It came two days ahead of the US non-farm payroll numbers. 

The US dollar rose after Fitch Ratings decided to slash America’s bond ratings, as I wrote here. Analysts believe that the rating downgrade will not have a major impact on the American economy for now.

USD/RUB technical analysis

USDRUB chart by TradingView

The USD/RUB exchange rate has been in a strong bullish trend after bottoming at 50 in June last year. It has made a rising channel pattern that is shown in black. The pair is approaching the upper side of this channel.

It has moved above the 25-day and 50-day exponential moving averages (EMA). Also, the pair has risen above the 38.2% Fibonacci Retracement level. Therefore, the path of the least resistance is upwards. If this happens, the next level to watch will be at 100, which is about 32% above where it was when Russia invaded Ukraine.