Here’s why the Russian ruble has bounced back

The USD/RUB price continued its deceleration on Wednesday morning as investors focused on the ongoing tensions between Russia and Western countries. The Russian ruble is trading at 76.42 against the US dollar.

Why is Ruble rising?

The USD/RUB pair has been under pressure in the past few days. It has declined by almost 5% from its highest level on January 26th. 

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The strength of the Russian ruble has happened at a time when tensions between Russia and Western countries like the US are at elevated levels.

Russia has accused NATO of its decision to expand in Eastern Europe. Precisely, it has concerns about whether Ukraine will one day join NATO.

The West, on the other hand, has accused Russia of trying to invade Ukraine again like it did in 2014 when it annexed Crimea.

To deter Russia, the Biden administration has announced that it will apply maximum sanctions on the Russian economy. There are even considerations to ban Russia from the Swift system. 

There are two main reasons why the USD/RUB has declined despite the ongoing tensions. First, the two sides have been in deliberations in the past few weeks. Russia responded to a letter by the Biden administration this week. 

Second, the skirmish has pushed the price of crude oil and natural gas substantially higher. Brent is trading at the highest level in more than 7 years while natural gas has spiked to a multi-decade high.

Higher oil and gas prices are good for the Russian economy and the ruble because of the volume that Russia exports every day. It is the third-biggest oil producer in the world after the US and Saudi Arabia. Therefore, higher prices mean more foreign exchange for the Russian economy.

USD/RUB forecast

The four-hour chart shows that the USD/RUB pair has been in a strong bearish trend in the past few days. As a result, the pair has moved slightly below the 50% Fibonacci retracement level. It has also declined below the 25-day and 50-day exponential moving averages (EMA) while the Relative Strengtn Index (RSI) has also retreated.

Therefore. The Russian ruble will likely continue falling as bears target the next key support level at 76.00.