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Mueller Alarms Markets

The EUR/USD currency pair approached the highs of 2015 during the last trading session, but the statements by ECB's Mario Draghi had nothing to do with it. On the contrary, Draghi dispelled the investors' assumptions that the quantitative easing program will be cut in the near future, he also mentioned the negative consequences of the strengthening of the currency rate. Nevertheless, the euro strengthened considerably against the US dollar. Perhaps the news that Mueller started investigating Trump played a more important role in the dynamics of the currency pair. Currently, quotes are consolidating in a narrow diapason at the 1.16 area near a key level, and if this level is broken it may mean an exit from the long-term diapason formed in the end of 2014. However, from a fundamental perspective, there are no sound reasons for the euro to do that - despite the improving macroeconomic indicators, the ECB did not confirm the theory by speculators that monetary policy was to be tightened in the near future.

The dollar/yen pair closed near the opening levels, and today it continues declining. However, the main driver of decline in the currency pair is a general decrease in the greenback amid ongoing political feuds in the US. Speaking of the yen, this week after the statement made by the Bank of Japan it became clear that the currency did not get any support fundamentally, and the climb was short-term. Technically, the currency pair moved past the 50-day moving average and has potential to continue declining, with a guidemark at 111.20.

According the Central Bank of Russia, maturity of currency loans and eurobonds worth $16 billion becomes due in the third quarter, but, as stated by the regulator, it may be possible to prolong a part of this amount, and actual payments will be $12 billion, which is 1.5 lower than the previous assessment equaling to $8.5 billion.

For the Russian currency, it is, of course, a negative factor, yet it is unlikely that this factor will affect the medium-term prospects of the ruble. The current expectations, in our opinion, are partly factored in the ruble's quotes, considering the fact that the news that the US might tighten its sanctions against Russia has lost its novelty. On top of that, the national debt of the Russian Federation remains low, its account balance is in surplus, and one of the trump cards for the ruble is its high spread between the yield in rubles and the one in US dollars. Moreover, the spread may continue to be that way for quite a while. Taking into account the statement by Janet Yellen, it may be assumed that the US Fed will tone down its view on the tightening of monetary policy.

Based on our assessment, the ruble against the dollar will be maintaining the same trading range between 58-57 as the lowest border and 61-62 as the highest. In the short term, we will be waiting for the 58-57 level to be tested next week, and a trigger might be the OPEC+ meeting in Saint Petersburg.

Ivan Kapustyanskiy, equity analyst at Forex Optimum

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