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• The USD/RUB exchange rate has jumped by over 64% from the lowest point in 2022.
• Russia’s top exports have seen their prices crash this year.
• The country’s budget deficit is expected to continue widening.

The Russian ruble sell-off continued as the oil supply cuts failed to ameliorate the currency’s pain. The USD/RUB exchange rate has jumped by more than 20% and is trading at the highest point since April 2022. It has jumped from last year’s low of 55.66 to the current 81.73. Similarly, the EUR/RUB and GBP/RUB have jumped to 88.70 and 101.68, respectively.
 

Russian ruble goes to pre-war levels

The Russian ruble has moved back to its pre-war levels after having one of its worst plunges in years. This price action happened even as the US dollar index (DXY) dropped by almost 15% from its highest level in 2022.

The decline is mostly because of the increased pressures facing the Russian economy as the war in Ukraine intensifies. Natural gas prices have tumbled to their lowest levels since 2021.  

The same is true with other top Russian commodities like wheat and platinum. Wheat price have crashed by over 50% from the highest point in 2022. Platinum is down by over 14%.

Crude oil, which is Russia’s most important export, is also down by over 38% from its highest level in 2022. Earlier this week, the biggest crude oil news was that the OPEC+ cartel decided to slash output by over 1.7 million barrels. Russia will cut 500k barrels per day.

The main challenge for Russia is that it is selling most of its Urals to India and China. In an era of sanctions, these buyers are demanding huge discounts. Data shows that the Russian ural oil price was trading at $60, a $25 discount from Brent.

Therefore, the USD/INR pair has slumped as investors price in bigger budget deficits in Russia. Data showed that the country’s budget deficit widened to over $25 billion in January as the government boosted military spending.
 

USD/RUB technical analysis

(Click on image to enlarge)

USDRUB chart by TradingView

The daily chart shows that the USD to RUB exchange rate has been in a strong bullish trend in the past few weeks. It has soared by over 64% from the lowest level in 2022. The pair has managed to move above all moving averages while the Relative Strength Index (RSI) moved to the overbought level.

Therefore, at this stage, I suspect that the pair will continue rising as buyers target the next key resistance at 100. This will likely happen in the next few months. A move below 70 will invalidate the bullish view.

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