Forex Market: USD/RUB gains ahead of FOMC meeting

The US dollar advanced against the Russian ruble on Tuesday, after better-than-expected US economic data backed the case for further stimulus cuts before the Federal Reserve starts a two-day meeting today.

USD/RUB reached a session high at 36.535 at 7:00 GMT, after which consolidation followed at 36.503, rising 0.59% for the day. Support was likely to be received at March 17th low, 36.187, while resistance was to be encountered at March 17th high and also the highest level since March 3rd, 36.723.

Yesterday, the greenback touched a two-week high against the ruble, after an unexpected surge in Russian shares eased fears that results from Crimean referendum will cause an immediate escalation in geopolitical tension.

The Micex Index of shares closed up 3.7 percent at 1,283.70 yesterday.

Yesterday, the US and European Union warned Moscow not to annex Crimea after Sunday’s referendum, according to which 95.5% percent of voters backed the pro-Russian local government’s decision to separate from Ukraine and join Russia. While the United States, European Union and the Ukrainian government deemed the referendum illegal, Russia said it was in consonance with international law.

President Barack Obama authorized Treasury Secretary Jacob J. Lew to impose financial sanctions which may include freezing assets or prohibiting American companies or individuals from doing business with people or entities who threaten Ukraine’s security.

Meanwhile, better-than-expected US data backed the case for further stimulus cuts as industrial output in the United States rose 0.6% in February, marking the fastest monthly pace since August 2013. The result exceeded preliminary estimates, pointing to a 0.2% gain. In January the performance of the index of industrial production has been revised up to a 0.2% drop from a 0.3% drop previously.

In addition, the capacity utilization rate was 78.8% last month, which surpassed expectations of a rate of 78.6%.

The Federal Reserve, which reduced monthly bond buying by $10 billion at the prior two meetings, will cut purchases by another $10 billion to $55 billion, and continue reductions at the same pace at every meeting before exiting the program at its Oct. 28-29 gathering, according to a Bloomberg survey.