The Central Bank of Russia is expected to raise interest rates in its upcoming meeting.

The Russian ruble has been steadily weakening, currently hovering around 97 rubles per U.S. dollar, with potential for further depreciation in the near future. This decline is driven by robust U.S. economic data, which has strengthened the dollar significantly and reduced the probability of the U.S. Federal Reserve cutting interest rates by 50 basis points in November from 35% to 32%. Meanwhile, the Central Bank of Russia (CBR) raised its interest rate by 100 basis points to 19% in its previous meeting.

Russia’s trade surplus fell to $9.3 billion in August, down from $11.7 billion during the same period last year, with exports declining 7.1% year-on-year to $34.5 billion. This reflects a sharp drop in foreign demand for energy products, Russia’s main exports, which has resulted in reduced revenues. Reports indicate that oil and gas revenue for the federal budget fell by as much as 28%.

Inflation in Russia slowed to 8.6% in September, down from a yearly high of 9.1% in the previous month. This marks the first slowdown since the start of the year, though inflation remains significantly above the CBR's 4% target. Despite recent rate hikes, inflationary pressures persist due to high growth in service sector prices. Other goods prices also continue to rise rapidly due to the ruble’s depreciation.

The Composite PMI dropped to 49.4 in September from 52.1 in the prior month, marking the first contraction in private sector activity. This decline was driven by shrinking manufacturing output, while growth in the services sector slowed as new orders expanded at the weakest rate in a year. Additionally, labor and raw material costs continued to increase, forcing businesses to pass on higher costs through price adjustments.

The yield on Russia’s 10-year government bonds has been rising steadily, reaching 16%. This increase is largely attributed to the weakening ruble, prompting investors to expect another interest rate hike from the CBR at its upcoming meeting on October 25. The central bank is expected to raise rates by 100 basis points, bringing the policy rate from 19% to 20%.

Techical analysis data (5H)

Resistance: 97.6077, 97.8189, 97.936

Source: Investing.com

Buy/Long 1: If the price touches support in the price range of 97.1623 - 97.2794 but cannot break the support at 97.2794, you may set a TP at approximately 97.8189 and SL at around 96.9511 or according to your acceptable risk.

Buy/Long 2: If the price breaks the resistance in the price range of 97.6077 - 97.8189, you may set a TP at approximately 97.936 and SL at around 97.1623 or according to your acceptable risk.

Sell/Short 1: If the price touches resistance in the price range of 97.6077 - 97.8189 but cannot break the resistance at 97.6077, you may set a TP at approximately 97.1623 and SL at around 97.936 or according to your acceptable risk.

Sell/Short 2: If the price breaks the support in the price range of 97.1623 - 97.2794, you may set a TP at approximately 96.9511 and SL at around 97.8189 or according to your acceptable risk.

Pivot point October 17, 2024 11:16 PM. GMT+7