As the possibility of Russia invading Ukraine escalates, with the US ordering up its troops while NATO has placed its own forces on standby, the Russian ruble is currently being pressured by the geopolitical tensions.
As traders shift into risk-off mode, with the US dollar acting as a safe haven, the USD/RUB pair has fallen to a 14-month low. Where might the Eastern European currency be headed next?
The pair has been testing the top of a weekly symmetrical triangle since the March 2020 peak that coincided with the bottom for global equities and bond yields. That was also when the pair recorded an all-time high, something that hadn't happened since 1992.
Which explains why this pattern is developing at these sensitive levels. An upside breakout would mean that buyers of the currency pair have absorbed all available demand, since the ruble was selling off, and must therefore buy the dollar at higher prices, as they continue dumping the ruble, pushing it to even lower levels.
Alternatively, if the current standoff de-escalates, the USD/RUB is likely to trend lower, toward the low 70.000 range.
Trading Strategies
Conservative traders should wait for an upside breakout, then wait for at least three days with a close above 81.000. They'd then hang on for a return move that proves support above the pattern, before committing to an extended position. Alternatively, a close below the short-term uptrend line since the Oct. 26 low, followed by a failed climb back above it, may warrant a short.
Moderate traders would follow the same developments as conservative traders, only with lighter filters. A close above 80.000 might justify a long position. A wait for a return move for a better entry would reduce exposure. Alternatively, a cross below the short-term uptrend line may call for a short upon a corrective rally.
Aggressive traders could short with a stop-loss above the pattern. If the breakout does occur, they'd close the position and buy the pair. Money management is essential.
Here is an example:
Trade Sample – Aggressive Short
- Entry: 79.0000
- Stop-Loss: 80.0000
- Risk: 1,000 pips
- Target: 76.0000
- Reward: 3,000 pips
- Risk-Reward Ratio: 1:3
Author's Note: We're not in the fortune-telling business. A technical forecast is an expectation based on analysis derived from historical data. We do not know what will happen with this particular trade. Rather, we're saying that if traders behave as they have previously in this situation, the outcome is more likely to follow through in a certain way, as described above, based on our interpretation. To increase the odds for improved returns overall, you need to learn how to write a plan that meets your timing, budget, and temperament rather than work on a trade-by-trade basis. Until you know how to do that, use our samples to practice, but don't necessarily expect profits. That occurs when only when you gain enough experience to develop your trading style.
