Yesterday’s trade saw USD/RUB within the range of 41.190-43.884, reaching a new all-time high. The pair closed at 41.586, losing 3.69% on a daily basis.
At 8:25 GMT today USD/RUB was up 1.84% for the day to trade at 42.238. The pair touched a daily high at 42.287 at 8:26 GMT.
Fundamentals
United States
Personal Income and Personal Spending
Personal spending in the United States probably rose 0.1% in September compared to a month ago, according to market expectations, while personal income was probably up 0.3%. Spending increased 0.5% in August, following a flat performance in July, while personal income rose 0.3%. Disposable personal income (DPI) increased $35.2 billion, or 0.3%, in August. Private wages and salaries rose $30.4 billion in August, compared to an increase by $17.4 billion in the prior month. Higher than expected rates of increase imply good employment conditions and, therefore, are dollar positive. The Bureau of Economic Analysis is to publish the official figures at 12:30 GMT.
Employment Cost Index
Employment Cost Index (ECI) in the United States probably rose 0.5% during the third quarter of the year compared to Q2, following another 0.7% gain in Q2 compared to Q1. The latter has been the fastest rate of increase in employment costs since Q2 2011. This index measures the change in the price of labor, defined as compensation per employee hour worked. It shows changes in the cost of compensation not only for wages and salaries, but also for an extensive list of benefits. The ECI is considered as an indicator, reflecting cost pressures within companies that could trigger price inflation for finished goods and services. A larger than expected rate of increase would generally provide a certain support to the US dollar. The Bureau of Labour Statistics is to release the quarterly data at 12:30 GMT.
Chicago Business Survey
The Chicago Purchasing Managers Index (PMI) probably slowed down to a reading of 60.0 in October from 60.5 during the prior month. If so, this would be the lowest index reading since July. The index reflects business conditions in the regions manufacturing sector and is interrelated with the Manufacturing Index, published by the Institute for Supply Management (ISM). A reading above the key level of 50.0 is indicative of expansion in manufacturing activity. In case the PMI came below expectations, this would reduce the appeal of the US dollar. The MNI Deutche Börse Group will release the official reading of the Chicago barometer at 13:45 GMT.
Reuters/Michigan Confidence Indicator – final estimate
The monthly survey by Thomson Reuters and the University of Michigan may show that consumer confidence in the United States improved in October. The final reading of the corresponding index probably confirmed the preliminary value of 86.4 during the current month, which was reported on October 17th. If confirmed, this would be the highest reading in seven years. The survey encompasses about 500 respondents throughout the country. The index is comprised by two major components, a gauge of current conditions and a gauge of expectations. The current conditions index is based on the answers to two standard questions, while the index of expectations is based on three standard questions. All five questions have an equal weight in determining the value of the overall index.
The sub-index of current economic conditions was reported at 98.9 in October, unchanged from September, while the sub-index of consumer expectations came in at a reading of 78.4 in October, improving from 75.4 in September, according to preliminary data.
In case the gauge of consumer sentiment came in line with expectations or even showed a larger improvement than projected, this would boost demand for the greenback. The official reading is due out at 13:55 GMT.
Russian Federation
The Central Bank of Russia will probably raise its benchmark interest rate by 50 basis points to 8.5% at its policy meeting today in an attempt to stop the depreciation of the ruble, according to market expectations. The one-week repo rate was raised by 50 basis points (0.50%) to the current 8.0% at the central banks meeting, conducted on July 25th, in order to ease high inflation caused by geopolitical situation.
At the September 12th meeting the central bank left its benchmark intact, as current monetary policy is expected to lead to an inflation rate of as low as 4% in the medium run. According to extracts from Information Notice of Bank of Russia: ”In August – early September 2014 the year-on-year consumer prices growth rate increased again due to materialization of inflation risks associated with aggravation of geopolitical tensions, the imposition of external trade restrictions and the impact of these developments on the ruble exchange rate dynamics. As a result, consumer price growth rate is likely to remain exceeding 7% till the end of 2014.”
“Should the external political situation normalize, economic uncertainty decrease and expectations of economic agents improve, investment activity will see gradual recovery. Consumer demand growth will stabilize at a lower level. Net export contribution to GDP growth will stand close to zero. According to the Bank of Russia estimates, GDP growth rate in 2015 will amount to 0.9-1.1%.”
“Subdued aggregate demand along with total output of goods and services remaining slightly below potential will also facilitate inflation reduction. Current monetary policy stance will ensure deceleration of inflation to the target of 4% in the medium term.”
Short-term interest rates are of utmost importance for the valuation of national currencies. In case the Central Bank of Russia decides to raise interest rates further, this will provide support to the ruble. Banks key one-week repo rate was at an all-time high of 10.50% in April 2009, while its lowest level on record, 5.00%, was seen in June 2010.
The decision on policy is expected at 10:30 GMT.
Pivot Points
According to Binary Tribune’s daily analysis, the central pivot point for the pair is at 42.220. In case USD/RUB manages to breach the first resistance level at 43.250, it will probably continue up to test 44.914. In case the second key resistance is broken, the pair will probably attempt to advance to 45.944.
If USD/RUB manages to breach the first key support at 40.556, it will probably continue to slide and test 39.526. With this second key support broken, the movement to the downside will probably continue to 37.862.
The mid-Pivot levels for today are as follows: M1 – 38.694, M2 – 40.041, M3 – 41.388, M4 – 42.735, M5 – 44.082, M6 – 45.429.
In weekly terms, the central pivot point is at 41.567. The three key resistance levels are as follows: R1 – 42.363, R2 – 42.814, R3 – 43.610. The three key support levels are: S1 – 41.116, S2 – 40.320, S3 – 39.869.
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