USD/RUB: ruble outlook as Russia imposes fresh forex controls

The USD/RUB exchange rate continued slipping this week as the Russian ruble staged a strong comeback. The pair slipped to a low of 91.86 on Tuesday, much lower than the year-to-date high of 102.15.

Russian ruble rebounds

The Russian ruble has made a strong rebound in the past few weeks, helped by the elevated crude oil prices and currency controls. It has also done well, helped by the ongoing currency controls by the Russian government.

The most recent currency control happened this week when the government placed fresh rules on companies exiting their Russian operations. According to FT, these countries need to either sell their operations in the ruble.

Alternatively, these companies can accept foreign currencies like the US dollar or the euro. However, in this case, these firms must agree to a prolonged delay that could lead to substantial losses. 

The government’s hope is that these new capital controls will prevent capital flight from these companies. Companies like Coca-Cola, Heineken, and PwC have exited the Russian market since the war started.

The Russian government and the central bank have announced various measures to save the currency. The central bank has hiked interest rates several times this year while the government has forced big companies to sell some of their foreign currency.

The USD/RUB pair has retreated for other reasons as well. First, the Russian economy is doing well, helped by the rising military spending. The unemployment rate remains at 3.0%. 

Also, Russia is still making billions of dollars as the price of crude oil jumps. In a note on Tuesday, the World Bank warned that the price could hit $150 if the war between Israel and Hamas escalates. 

Further, there are signs that Russia has won the war against Ukraine. Ukraine’s counteroffensive has failed while Russia holds a fifth of the country. Also, Russian stocks have surged to a multi-year high.

USD/RUB technical analysis

USDRUB chart by TradingView

The daily chart shows that the USD to RUB exchange rate has been in a strong bullish trend this year. It has recently formed a double-top pattern at 102.01. In price action analysis, this pattern is usually a good bearish sign.

The USD to rub pair has moved below the lower side of the ascending channel shown in red. It has also dropped below the 50-day and 25-day Exponential Moving Averages (EMA). The two MAs have even made a bearish crossover pattern.

Therefore, the outlook for the pair is bearish, with the next level to watch being the psychological level at 85. The alternative scenario is where the stock recovers and retests the key psychological level at 100.