Russia is winning: just look at the USD/RUB and MOEX index

By:
on Feb 29, 2024
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  • The USD/RUB exchange rate has dropped sharply in the past few days.
  • The MOEX index has jumped after the strong Sberbank earnings.
  • There are signs that the Russian economy is doing well.

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As the war in Ukraine enters the third year, there are signs that Russia is winning economically and on the war front. The country’s stocks have jumped, with the MOEX index sitting near its highest point on record. At the same time, the USD/RUB exchange has dropped by 11% from its highest level in 2023 and is roughly at the same point it was when the war started.

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Russia is doing well

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To a large extent, Russia has won the war in Ukraine. While it failed to capture Kyiv, Russia is still in control of about a fifth of the eastern side of the country. It will likely gain more ground as Ukraine runs out of ammunition and troops.

The Russian economy is also thriving as data published this week revealed. According to the statistics agency, the country’s unemployment rate stands at 2.9%, meaning that it is in full employment. In contrast, the US jobless rate stands at 3.7%.

The report also showed that Russia’s retail sales jumped by 9.1% while industrial production jumped by 4.6% on a YoY basis. This is happening as the country’s defence industry booms as it continues producing weapons. Over 40% of Russia’s budget is moving to the industrial sector.

Meanwhile, Russia has successfully managed to ship its oil and gas, generating billions of dollars. It has done that by pivoting from Western countries to places like India and China.

Most importantly, Russia has managed to dodge Western sanctions. It is still buying Western goods through foreign intermediaries. Also, the country has taken control of some of the top Western companies that left after the invasion.

The outcome of all this is that Russia will become an independent country which will be hard to sanction in the future.

Russian companies are thriving

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The most recent results show that many Russian companies are thriving. On Wednesday, Sberbank said that its profits jumped to a record high, helped by strong demand for mortgages. Its profit surged to over $16.3 billion even though it is still under heavy sanctions by Western governments.

The company expects that this will be a better year as interest rates are set to remain at an elevated level. Other Russian banks are doing well.

Looking at the MOEX index, five constituent companies have jumped by over 100% in the past 12 months. They include names like HeadHunters, Surgut-pref, Tatneft-3, Tatneft-OAO, and Globaltrans Investment. 

Taken together, there is a likelihood that Russian stocks and the ruble will continue doing well in the coming months. 

USD/RUB technical analysis

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USD/RUB

USD/RUB chart by TradingView

On the daily chart, we see that the USD/RUB exchange rate has retreated in the past few days. It has dropped in the past four straight days equivalent to 4.5% from its highest point this month. 

The pair has moved below the 50-day Arnaud Legoux Moving Average (ALMA) while the two lines of the MACD have made a bearish crossover. Further, the Relative Strength Index (RSI) has pointed downwards. This means that the pair will drop to the key support at 86.80, its lowest point in January.

MOEX index analysis

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MOEX index

Turning to the 1D chart, the MOEX index has bottomed at RUB 184.46, its lowest points on December 12 and February 22nd. It has now crossed the 50-day moving average. The RSI has pointed upwards while the MACD has moved to the neutral point.

Therefore, the outlook for the index is bullish, with the next point to watch will be at RUB 212.90, the highest point in 2023.

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