Forex Market: USD/RUB trades near a one-week trough, Russia’s MOEX hits two-week highs

USD/RUB extended losses from last week and traded not far from a fresh one-week low on Monday after Russia demonstrated readiness to continue negotiations with Western nations over the Ukraine crisis.

The exotic pair scaled a near 15-month high last Wednesday amid rising tensions between Kremlin and the West, which has promised to impose new economic sanctions on Russia in case of an aggressive move against its neighbor Ukraine.

Last week Moscow said the United States and NATO had not addressed its main security demands in their stalemate over Ukraine, but still, it was prepared to continue negotiating.

“The geopolitical situation remains up in the air – the temporary lull in tensions may leave room for further upside if shocks are avoided,” BCS Global Markets wrote in an investor note.

Meanwhile, on the macroeconomic front, Russia’s inflation rate has remained persistently high and its central bank may announce another significant rate hike at the upcoming policy meeting on February 11th. Last year Bank of Russia raised its benchmark rate seven times from 4.25% to 8.50% currently.

The Eurasian Development Bank has projected an annual inflation within the range of 8.7%-8.9% at the end of January, or well above Bank of Russia’s inflation objective of 4%.

The rouble-based MOEX stock index surged to a fresh 2-week high of 3,566.05 on Monday and was last up 1.70% on the day to 3,548.05.

Brent crude oil, a global benchmark for Russia’s main export, was losing 1.64% on Monday to $89.18 per barrel.

As of 10:10 GMT on Monday USD/RUB was edging down 0.35% to trade at 77.5578. Earlier in the trading session the Forex pair slipped as low as 77.2809, which has been its weakest level since January 24th (76.9855). The exotic currency pair has appreciated 3.90% so far in January, following another 0.77% gain in December.

Analysts at Promsvyazbank forecast a target range of 76.5-78.0 for the currency pair this week in case there are no news shocks.

Daily Pivot Levels (traditional method of calculation)

Central Pivot – 77.8431
R1 – 78.2718
R2 – 78.7156
R3 – 79.1443
R4 – 79.5729

S1 – 77.3993
S2 – 76.9706
S3 – 76.5268
S4 – 76.0829