I was recently invited to contribute to an article on Bullbearings where they asked analysts and traders about their top trade ideas for 2015.
I decided to talk about USDRUB – which has been a great trade all year. I’ve not really mentioned on this blog but I’ve been trading it and talking about it since Q1 on the Market Analysis I provide for institutional clients.
If you haven’t heard me talk about USDRUB well see the chart below to see what a great trade its been this year. As I explained in the article this was a perfect example where Technicals, Fundamentals and Sentiment all lined up and price climbed like a Typhoon Fighter Jet (not like an asthmatic Tornado F3. Sorry – private joke there for one of my readers.)
As I mentioned in the article: why talk about USDRUB now when many would think that the move is over? I believe a lot of the sentiment can be backed from the present geo-political situation which leaves us with two options after the recent G20 meeting:
- Putin backs down: he decides to toe the line withdraw forces and pressure on Ukraine and everybody breathes a sigh of relief. This would mean a lessening of sanctions and I believe that would have a knock-on effect in the USDRUB of a move in price back to value. Or reverting to mean – which for me would be back towards the 50 period Moving Average around 37-ish.
- Putin ups the ante: after the G20 he’s become so incensed and entrenched in his position that he starts causing more trouble and ups the ante. This could mean direct confrontation which would (I believe) mean a further weakening of the Rouble and a flight towards the USD in which case I’d expect to see a break of the high of 48.60 and a further move north.
And that’s what I said in my article. So on the evening of the 24th November USDRUB closed at approx 44.80 and my article was posted on 25th November. A week later and the trade has already taken off – It wasn’t waiting for 2015.
Today (Tuesday) price has traded as high as 53.99 today (Tuesday). Boom!
If you look at the lower time frames (daily and 4hour) you’ll see that its been a messy week for the pair, and its only Tuesday (as I write this!) So whats been going on in the last few days to cause such a surge? ( Price Action has been messy due to central bank intervention.) On Monday the rouble suffered its biggest one-day decline since 1998. Furthermore there’s been comments about the Russian economy and it’s projected move into recession in 2015. There was also the OPEC meeting of last week and the continued weakness in the Oil price (with Russia being the worlds second largest oil exporter it means oil and gas account for 70% of its exports and half of government revenues – the low price and over-supply will be crippling Russian tax revenues) And then today I understand the Russians have cancelled their next major gas pipeline project (which I believe was running to Europe – am happy to be corrected on that.)
Finally I came across an interesting quote by Donald Tusk (the Polish ex-PM who’s about to become president of the European Council) in his engaging interview with the FT weekend:
“For Putin, and Russia today, the EU is a problem. And we have to understand, and I think we are close to this moment, that Russia is not our strategic partner. Russia is our strategic problem.”
(You can read the full article here: http://www.ft.com/cms/s/0/72d9b928-7558-11e4-b1bf-00144feabdc0.html#ixzz3KlFz1BmT )
All of which I thought was very strong words from a man who’s about to play a major part in shaping the future of Europe. I have to say it does start to make me all a bit nervous – but then I know I’m a bear and a pessimist when it comes to geo-political situations.
Anyway I’m not in any way an Oil trader or Oil specialist but even I can work out that Putin, Russia and the Rouble face some very stiff headwinds, all of which may provide trading opportunities for you all. This is definitely one pair to keep an eye on! What are you thoughts?
Trade well………and maybe get hold of your granddad’s Anderson Shelter for when it all kicks off!
Paul
December 3, 2014 at 9:02 am
USDRUB is not a pair I follow, excellent article Paul!
December 3, 2014 at 2:32 pm
Thanks for the feedback Kalpesh, I appreciate it. I’d keep an eye on the Rouble at the moment….if for no other reason than entertainment. Seriously though it gives a good insight into when Technicals, Fundamentals and Sentiment all align, and how markets react. It happens a couple of times a year and there are great opportunities when that occurs. You don’t need to be a rock-star trader, just use a little common-sense.
December 5, 2014 at 4:34 pm
Fantastic read Paul.
December 10, 2014 at 1:46 pm
Thanks for the feedback George.