Market news
16.05.2022, 07:00

USD/RUB retreats from $66.50 even as risk-aversion underpins USD strength

  • USD/RUB fades bounce off two-year low, takes offers to renew intraday bottom of late.
  • NATO’s Stoltenberg said that Russia’s war in Ukraine is not going as it planned.
  • Finland, Sweden add to the geopolitical fears while bracing for NATO membership.
  • US Retail Sales, Fedspeak and oil prices are the key catalysts to forecast near-term moves.

USD/RUB struggles to keep Friday’s rebound from the lowest levels since 2020 as the Russian ruble (RUB) pair drops back towards $65.15 heading into Monday’s European session.

In doing so, the quote struggles to justify the US dollar’s recent safe-haven demand, as well as softer oil prices. Also portraying the indecision of the USD/RUB traders are mixed concerns surrounding the Russia-Ukraine war and the recent chatters of Finland and Sweden opting for the North Atlantic Treaty Organization (NATO).

The US Dollar Index (DXY) dribbles around a 20-year high, fails to extend Friday’s pullback. That said, Fed Chairman Jerome Powell’s 50 bps rate hike view joins the downbeat US Consumer Sentiment Index data to challenge the greenback buyers. However, the recent risk-off mood favors the greenback’s safe-haven demand.

Elsewhere, the WTI crude oil prices, Russia’s key export, snap a three-day uptrend as sellers dominate below $110.00, down 0.62% intraday by the press time. In addition to the firmer USD, recent headlines from Saudi Arabia also weigh on oil prices. Recently Saudi Arabia signaled to boost oil production capacity by the end of 2026-early 27.

On a different page, European Union’s Foreign Minister Borrell mentioned that they can't guarantee sanctions issues will be resolved immediately. The same may have helped the RUB to regain its upside momentum.

It’s worth noting that the Nato Secretary-General, Jens Stoltenberg, said Russia’s offensive in Donbas had stalled and Ukraine could win the war, an outcome few military analysts predicted at the outset of the conflict, per The Guardian. The news also stated, “Finland on Sunday confirmed it would apply to join Nato, while Sweden’s ruling Social Democrats backed Nato membership, paving the way for an application and abandoning decades of neutrality.”

In a reaction to the same, Russian Deputy Foreign Minister Ryabkov stated that the global situation will change drastically after the Swedish decision to join NATO, per RIA news.

Amid these plays, the S&P 500 Futures drop 0.70% intraday whereas the US 10-year Treasury yields fall 4.2 basis points (bps) to 2.89% by the press time.

Moving on, USD/RUB traders should pay attention to the qualitative catalysts amid a light calendar ahead. Even so, the US Retail Sales for April will become important amid the recently mixed inflation figures.

Technical analysis

Although a two-month-old descending resistance line joins the 10-DMA to restrict short-term USD/RUB rebound to around $67.00, Friday’s Dragonfly Doji candlestick probes sellers until the quote stay beyond $62.83.

 

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