Best of the Week
Most Popular
1.Stock Market Crash and Recession Indicator Warning: Extreme Danger Ahead - Harry_Dent
2. Is This How World War III Begins, In Almost Complete Silence? - Jeff_Berwick
3.Trump Wins 2nd Presidential Debate, Betfair Betting Markets Odds Bounce - Nadeem_Walayat
4.Why Krugman, Roubini, Rogoff And Buffett Dislike Gold - GoldCore
5.End of SPX Stock Market Correction Nears - Tony_Caldaro
6.Get Ready for the Future - Exponential Machine Intelligence Mega-trend towards Singularity - Nadeem_Walayat
7.US Housing Market Bubble II – It’s Happening Again! - Andy_Sutton
8.FTSE BrExit Stock Market Panic Crash Resolves towards New All Time Highs - Nadeem_Walayat
9.Can Trump Still Win Despite Opinion Polls, Bookmakers and Pundits all Saying Hillary has Won? - Nadeem_Walayat
10.Gold’s, Miners’ Stops Run - Zeal_LLC
Last 7 days
The Next Big Shoe to Drop – Student Loans - 27th Oct 16
The Twists and Turns of the Greenback - 27th Oct 16
Obamacare Is Draining Our Financial Reserves - 27th Oct 16
Brexit II: Is Donald Trump a False Flag? - 27th Oct 16
“Chindia” Buying Gold on Dips, 20% Corrections Are “Non Events” - 27th Oct 16
4 Incredible Market Forecasts You Have to See to Believe - 26th Oct 16
Silver Prices in an Exponential Financial System - 26th Oct 16
Rigged Election: Hillary and Trump Caught Partying Like BFF’s With Kissinger at Jesuit Gala - 26th Oct 16
The Current Message of Yield Curves: Inflation or Deflation? - 25th Oct 16
Broken Central Banks: 4 Quick Pix - 25th Oct 16
Government Stimulus is an Oxymoron, Debt to GDP - 25th Oct 16
Where Will Crude Oil Price Head Next? - 25th Oct 16
Diamonds in the Gold and Silver Mining Stocks - 25th Oct 16
Trump’s Gettysburg Address against the New World - 25th Oct 16
This Past Week in Gold - 24th Oct 16
Can Gold Continue To Rise, Since The Usd Is Moving Higher Too? - 24th Oct 16
Why are Americans Avoiding the Stock Markets; Fear or Lack of Money? - 24th Oct 16
The US Is NOT a Low-Tax Jurisdiction - 24th Oct 16
Stocks, Crude Oil and EURUSD Trend Forecasts - 24th Oct 16
Stock Market Another Month to Go? - 24th Oct 16
Large Sell-off in Stock Market Looming - 24th Oct 16
Ungovernability - 24th Oct 16
Stock Market Boredom Before The Storm - 24th Oct 16
Establishment Mainstream Media Elite Buys US Election for Hillary Clinton, Time Running Out for Trump - 23rd Oct 16
Inflation About To Explode Higher - 22nd Oct 16
Still waiting for SPX uptrend to kick off - 22nd Oct 16
Will a Rising US Dollar Crush Gold’s Fledgling Bull? - 22nd Oct 16
Why The Global Economy Will Disintegrate Rapidly Back to Olduvai Gorge - 22nd Oct 16
GLD Bleeds Out; Weekly Gold Update - 22nd Oct 16
Stock Market Investment Success Through the “Investment Rule of 72” - 21st Oct 16
The Final Bottom in Gold - WHEN - 21st Oct 16
Gold Green Lights Upleg - 21st Oct 16
Demand for US Mints Silver Eagles has ‘Returned with a Vengeance’ - 21st Oct 16
Central Bankers Can't Stop The Death Blow Of The Post US Election Recession - 21st Oct 16
The Fortune at the Bottom of the Pyramid: Golden Opportunity for Frontier Asia - 21st Oct 16
Have You Taken These 4 Simple Steps to Improve Your Trading? - 21st Oct 16
The Stock Market is an Accident Waiting to Happen - 20th Oct 16
It's Rally Time for Gold and Silver Equities - 20th Oct 16
Cashless Society – Risks Posed By The War On Cash - 20th Oct 16
China's insane Housing Market Will Tumble and Crash in 2017 - 20th Oct 16
Donald Trump Bounces Going into 3rd and Final US Presidential Election Debate - 20th Oct 16
Attention Please: Phase Two of the Gold and Silver Train Now leaving the Station. All Aboard? - 19th Oct 16
How to Successfully Trade a Stock Market Crash - Black Monday October 19th 1987 - 19th Oct 16
Tesla, Apple and Uber Push Lithium Prices Even Higher - 18th Oct 16
Silver, Debt, and Deficits – From an Election Year Perspective - 18th Oct 16
UK Property Market: Slow Growth Does Not Equate To Decline - 18th Oct 16
Trump Election Victory is in Your Power - 18th Oct 16
Stock Market More to Come! - 18th Oct 16
This Past Week in Gold and Silver - 17th Oct 16
A Falling Stock Market Cannot Be Allowed - Financial Repression Is Now “In-Play”! - 17th Oct 16
Commodities, Forex and Stock Market Trend Forecasts - 17th Oct 16
Stock Market Crash..or No Crash? - 17th Oct 16
A perspective on risk rally – Risks abound but Stock Market is Confident - 17th Oct 16
Bank of England Blames Brexit for Sterling Drop Inflation, Masks QE Money Printing Cause - 17th Oct 16
From Piety to Pride to Pity, America's Racial Divide - 17th Oct 16

Free Instant Analysis

Free Instant Technical Analysis

Market Oracle FREE Newsletter

The Power of the Wave Principle

Crude Oil Foretells Additional Ruble Losses

Commodities / Crude Oil Jan 21, 2016 - 04:23 PM GMT

By: AnyOption

Commodities Warnings from the IEA and new lows in key global benchmarks continues to weigh on the outlook for energy prices, hurting the foremost global oil and gas exporters.  Russia has experienced a reversed rags to riches tale over the last two years as the impact of sanctions and the slump in the energy patch have kept the Ruble under extreme pressure.  The underperformance continues to echo the losses in oil prices as the supply and demand imbalance remains largely unchanged, only set to grow in coming months with the expansion of Iranian crude oil exports.  With market dynamics expected to be weak and existing projections forecasting no rebound in prices, the weakness in the Ruble is only likely to accelerate over time, matching losses in oil prices.

Russia’s Shifting Tides

Fortunes have rapidly shifting in Russia over the past two years as biting sanctions combined with the parallel drop in oil and gas prices have seen gains of the last two decades quickly reversed.  In the period leading up to the spat with Ukraine, Russia experienced the strongest growth since the fall of the Soviet Union as it rapidly improved its global standing and increased its spheres of influence.  However, the situation in Ukraine and growing hostilities in Syria could not have come at a worse time for the Russian Government which has had to confront crises on multiple fronts. 

The painful economic contraction of the last year has left no stone unturned for the country as it contends with high inflation, rising unemployment, and a deep recession.  With oil and gas revenues accounting for the single largest portion of Government revenues, the precipitous slide outweighs other geopolitical developments as far as importance on the outlook for the Ruble.  With oil prices not expected to cross the threshold of $50 per barrel before 2020 according to the current futures curve, Russia will have to contend with prices remaining lower for longer.

Production Remains High

According to the latest estimates from the International Energy Agency, global oil markets are set to “drown in oversupply” until the end of 2016 at the very earliest.  The changing dynamic in the Middle East with the onset of renewed Iranian exports and growing production amid largely stagnating energy demand has set the stage for further declines in prices.  Supply is predicted to continue outstripping demand by 1.50 million barrels per day at least through the first half of the year.  Already, both the Brent and West Texas Intermediate benchmarks have responded in kind, with oil prices falling to new 12-year lows earlier in the week amid continued momentum lower in prices.

Russia, which recently overtook Saudi Arabia as the world’s biggest crude oil producer, is already anticipating tougher times to come after slashing the Government budget by 10% for the upcoming year.  Russia has promised it will be unrelenting in its levels of production even if crude prices continue to fall.  Some estimate prices could fall below $10 per barrel before Russia would contemplate production cuts.  Thanks to the lack of intervention in the Russian Ruble by the Central Bank, the free-floating currency has mirrored the fall in energy prices, helping to offset some of the losses.  With oil prices unlikely to hit major support until the low $20s and high teens, the Ruble will likely shadow the developments, responding in kind with additional weakness as the USDRUB hits new record highs.

Ruble Breakout Just Beginning

After setting up in an ascending triangle pattern for the better part of a year, consolidating between resistance at and a prevailing uptrend, the USDRUB broke out to the upside back in December in a sign the trend higher is set to persist over the coming months.  When taking into account IEA forecasts and market expectations, further losses in crude oil prices are likely to see a strong inverse correlation with the USDRUB pair based on Russia’s dependence on the critical energy export economy.  The pair hit new multi-year highs today, mirroring the drop in oil prices to new multi-year lows as the acceleration lower in global equity markets has spread to other asset classes.

Although initiating long positions at the present price in the USDRUB is not suggested, especially with the RSI clearly in overbought territory owing to the near vertical and parabolic momentum higher in currency pair, pullbacks should be viewed as an optimal opportunity to establish and add to positions.  The Ruble is unlikely to see fortunes improve until oil and gas prices bottom out and begin on the path towards a sustainable rebound.  In the meantime, the 50 and 200-day moving averages will continue to act as key support levels for prices.  It is very important however not to chase after momentum higher, as the volatility in the pair is only expected to pick up in the coming weeks. 

Buy the Dip

Although 2016 is not necessarily destined to be the best year for risk-assets, buy the dip is a worthwhile strategy when it comes to trading the US dollar versus emerging market currencies.  The pace of outflows and increased risk-aversion gripping financial markets globally means that any pullback and correction should be exploited to add to existing core positions on the ride up in the USDRUB pair.  With the geopolitical and underlying economic conditions unlikely to improve in the coming months, the Ruble is only likely to give further ground versus peers.

Anyoption™ is the world's leading binary options trading platform. Founded in 2008, anyoption was the first financial trading platform that made it possible for anyone to invest and profit from the global stock market through trading binary options.

Our goal here at Market Oracle is to provide readers with valued insights and opinions on market events and the stories that surround them.

© 2016 Copyright  Anyoption - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

© 2005-2016 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife