The Russian ruble continued its strong momentum on Monday even after Donald Trump threatened more sanctions on Russia and called Vladimir Putin “crazy”. The USD/RUB exchange rate dropped to 79.48, its lowest level since April 2021, down by 30% from its highest point this year.
This article explains why the Russian ruble could surge soon after the USD to RUB pair formed a bullish divergence and a falling wedge pattern.
US and Russia relationship at risk
The USD/RUB has been in a strong downward trend since Donald Trump became president, on the hopes that he would engineer the end of the ongoing war in Ukraine. He had promised to end the war within 24 hours.
Despite months of talks, no progress has been made, and the situation seems like it may get worse. In a Truth Social post, Trump said that Putin had gone crazy and threatened more sanctions against the country. Still, it is unclear whether there are more left to sanction.
However, increased tensions between the US and Russia mean that the sanctions relief analysts expected in the early days of Trump’s administration are over.
While the Russian economy has been resilient, ending sanctions would help to supercharge its performance. Indeed, some companies have been working on re-entering the market, especially in the energy market.
The Senate has proposed a new sanctions bill that risks isolating Russia more. Sponsored by Lindsey Graham, the new bill would slap a 500% tariff on imports from countries that buy Russian oil, petroleum products, natural gas, and uranium. It would also bar US companies and individuals from buying Russian sovereign debt. In a statement, John Thune said:
“If Russia’s not willing to engage in serious diplomacy, the Senate will work with the Trump administration to consider additional sanctions to force Putin to start negotiating.”
Crude oil prices
A potential indirect way to punish Russia would be in the energy market, where it makes most of its money. A sharp decline in crude oil prices, as we have predicted, would lead to a deeper strain on the economy.
There are signs that crude oil prices will fall further this year. Trump has expressed hopes for reaching a deal with Iran, a move that would unlock millions of barrels of oil a day.
OPEC+ is also considering boosting oil production for the third time this year. Such a move would lead to higher supply at a time when analysts anticipate that demand will be muted this year because of the ongoing trade war.
US dollar index crash
The USD/RUB exchange rate has also crashed because of the ongoing US dollar index (DXY) sell-off, which has moved into a technical correction after falling by over 10% from its highest point this year.
The dollar has dropped after Moody’s slashed the US credit rating this month and after the US House voted for Trump’s spending package, increasing the debt by over $4 trillion in the next decade.
These actions have pushed investors to dump the US dollar as they evaluate its role as a safe-haven currency.
USD/RUB technical analysis
The daily chart shows that the USD/RUB exchange rate has been in a strong bearish trend this month. However, there are signs that the sell-off may end soon as the coin has formed a falling wedge pattern, a popular bullish reversal sign in technical analysis.
The pair has also formed a bullish divergence pattern as the MACD and the Relative Strength Index (RSI) have pointed upwards. A bullish divergence happens when an asset’s oscillators are rising as the price falls.
Therefore, a combination of a falling wedge and a bullish divergence, pointing to more gains, potentially to 84.78, the lowest point in August last year.
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