Russia's inflation rate increased again.

The Russian ruble has stabilized after a rapid decline, which was temporarily attributed to the Ministry of Finance postponing foreign currency purchases. The ministry stated this was done to prevent further depreciation of the ruble. However, the ruble remains significantly weaker compared to the previous year. Additionally, sanctions have disrupted foreign currency inflows, making it difficult to strengthen the ruble again. These sanctions have also directly impacted Russia's export businesses.

Russia's annual inflation rate surged to 9.5% in December, up from 8.9% in the previous month, marking the highest level since the country faced the repercussions of its invasion of Ukraine, which began in February 2023. The inflation rate aligns with the Russian Central Bank's warning that the weakening ruble would lead to rapid inflation, as import costs rise. Furthermore, a labor crisis caused by mobilization efforts and increased spending levels has pushed food inflation to 11.1%, with vegetable prices rising particularly sharply by 22.1%. However, inflation for non-food products showed a more moderate increase at 6.1%.

Russia's Services PMI dropped to 51.2 in December from a 10-month high of 53.2 in the previous month. This decline was primarily driven by a rapid drop in demand due to sanctions, including a slight reduction in new orders. At the same time, production capacity continued to decrease due to labor shortages. Rising production costs, driven by the ruble's depreciation, led companies to pass these costs on to product and service prices, with costs hitting an 11-month high.

The Manufacturing PMI fell to 50.6 in December from 51.3 in November, signaling modest growth in the manufacturing sector for a second consecutive month. This growth was supported by a slight increase in new orders, as customer demand continued to rise, particularly for export orders, which grew rapidly. However, production expansion remained weak due to a second consecutive decline in employment. On the cost side, production costs decreased slightly, with expectations that output could improve in the coming months. Nevertheless, concerns about rising prices and material shortages persist.

The yield on Russia's 10-year government bonds remained steady at 15.7% in January, amidst declining demand for Russian assets due to ongoing sanctions and the Central Bank's swift tightening of monetary policy in recent months. However, concerns over the ruble's depreciation, soaring inflation, labor crises, and supply chain disruptions caused by sanctions have prompted the Central Bank to consider raising interest rates further this year to address potential inflationary pressures stemming from expansionary fiscal policies and substantial military spending.

Techical analysis data (5H)

Resistance: 103.0122, 103.459, 103.886

Source: Investing.com

Buy/Long 1: If the price touches support in the price range of 101.7114 - 102.1384 but cannot break the support at 102.1384, you may set a TP at approximately 103.459 and SL at around 101.2646 or according to your acceptable risk.

Buy/Long 2: If the price breaks the resistance in the price range of 103.0122 - 103.459, you may set a TP at approximately 103.886 and SL at around 101.7114 or according to your acceptable risk.

Sell/Short 1: If the price touches resistance in the price range of 103.0122 - 103.459 but cannot break the resistance at 103.0122, you may set a TP at approximately 101.7114 and SL at around 103.886 or according to your acceptable risk.

Sell/Short 2: If the price breaks the support in the price range of 101.7114 - 102.1384, you may set a TP at approximately 101.2646 and SL at around 103.459 or according to your acceptable risk.

Pivot point January 17, 2025 09:15 PM. GMT+7