Can’t trade the Russian Ruble? Look to Eastern European EMs

Bank notes of different currencies
Joe Perry
By : ,  US Market Analyst

The volatility for the Russian Ruble is unprecedented. USD/RUB broke through all-time highs on February 24th at 85.98.  However, it wasn’t until Russia was removed from SWIFT last weekend that the pair spiked higher, reaching an intra-day and all-time high of 122.25 on Wednesday.  The Bank of Russia went as far as to say it can no longer prevent the collapse of the Ruble.  As a result, most banks and brokers are unable to quote the exchange rate for Ruble pairs (the Bank of England today even said it would stop quoting Ruble exchange rates), leaving many traders frustrated that they can’t take advantage of the volatility.

20220303 usdrub daily ci

Source: Tradingview, Stone X

What are Emerging Market currencies?

As we had written about earlier in the week, some of the Eastern European Emerging Market currencies are highly correlated with USD/RUB. The current correlation coefficient between USD/PLN and USD/RUB is +0.96. A correlation coefficient of +1.00 means that there is a perfect positive correlation and that the 2 assets move in the same direction 100% of the time.  A reading of +0.96 is pretty close.  USD/PLN twice pierced through all-time highs at 4.3078 but failed to close above it, until today. The pair also broke through a trendline dating to March 31st, 2021.

20220303 usdpln daily ci

Source: Tradingview, Stone X

On a 240-minute timeframe, USD/PLN has been trading in a channel higher since February 25th.  First resistance is at yesterday’s high of 4.3536, then the 161.8% Fibonacci extension of the highs of November 23rd, 2021 to the low of February 10th at 4.3841.  The next resistance is at the top trendline of the upwards sloping channel near 4.4015.  First support is at the previous all-time high at 4.3078, then yesterday’s low and the bottom, upward sloping trendline of the channel near 4.2518.   Additional horizontal support sits just below at 4.2395.

20220303 usdpln 240 ci

Source: Tradingview, Stone X

USD/HUF and USD/RUB currently have a correlation coefficient of +0.95.  Therefore, the 2 currency pairs have a strong correlation on the daily timeframe.  Yesterday, USD/HUF pierced all-time new highs near 341.25, however failed to close above it.  The pair also broke above the long-term horizontal trendline dating back to March 9th, 2021.

20220303 usdhuf daily ci

Source: Tradingview, Stone X

On a 240-minute timeframe, USD/HUF has been trading higher in a well-organized channel since February 22nd.  First resistance is at yesterday’s high of 345.66, then the 161.8% Fibonacci extension from the highs of December 15th, 2021 to the low of February 6th near 349.84.  The next resistance is at the upward sloping trendline of the channel near 352.00.  First support is the previous all-time highs of 341.25, which is also the bottom trendline of the upward sloping channel.  Below there, USD/HUF can fall to the highs from March 15th at 333.46.

20220303 usdhuf 240 ci

Source: Tradingview, Stone X

A quick look at the USD/CZK shows that it’s correlation with the USD/RUB  is +0.95, also very high.  However, the USD/CZK is NOT trading near all-time highs (which is 26.50), as are USD/PLN and USD/HUF.  The pair broke above previous highs from December 15th and the trendline dating back to March 5th. It currently is banging against the 50% retracement level from the highs of March 2020 to the lows from May 2021 near 23.3973.

20220303 usdczk daily ci

Source: Tradingview, Stone X

Horizontal resistance sits just above at 23.4863, then the 161.8% Fibonacci extension from the highs of November 26th, 2021 to the lows of January 18th at 24.0516.  There is also long-term horizontal resistance at this level dating back to November 2020.  First support is at the previous resistance (old highs) near 22.9325.  Below there, price can fall all the way to horizontal support at 22.0105.

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