Medium term
Trade view / 28 July 2017 at 2:56 GMT

Macro Monday Strategic Book: Bearish EURRUB –  #SaxoStrats

Global Macro Strategist / Saxo Bank Group - Singapore Hub
Instrument: EURRUB
Price target: 67.52
Market price: 69.50
Management and risk description

I'm shorting EURRUB at 69.50 in both the Tactical and Strategic books. 

As flagged in the Macro Monday call, I've been looking to get this exposure for a while now and current thinking is putting on half the risk now pre the Central Bank of Russia (CBR) decision and potentially putting the other half on after – either today or next week.

Do note that the consensus CBR expectations is for no cuts, but it has been on an easing bias of late given the downtick in CPI early in the year. However, the last CPI print was above 4% which is its target level.

I am also thinking of adding Russian sovereigns in the Strategic book over the next few weeks, as the Strategic book also needs to undergo some housecleaning. 

Positioning rationale

The risks of US sanctions and a CBR cut today are mainly priced in, on top of which the rouble is at record short positions vs. record long positions in the euro, and it's not captured any of the 15% move up in oil that we’ve had since June 21.

  • Oil has bounced back quite strongly over the last few weeks and is looking technically quite strong, yet the rouble has not really moved off of this move up in oil.
  • The market has a huge record short position on the rouble, record shorts over the last two year. This is an anomaly in the EM FX space, where most people are long EM FX. I think we will get a big squeeze in RUB shorts, because its also an expensive currency to be short.
  • Conversely the market has a huge long extreme position on the euro, which is starting to look stretched with the run-up of the euro, and on the back of ECB President Mario Draghi’s dovish comments from yesterday’s ECB meeting 
  • The rouble has one of the highest carries in the world, with a central bank policy rate of 9.00%. Note it is expected to cut next week, but even with a 25 basis point cut … this is still vastly higher than other global central banks
  • The South African Reserve Bank surprised the market by cutting 25bp yesterday, taking its rate to 6.75%. This again leaves currencies like the RUB looking a lot more attractive
  • The technical and price action seem to suggest that the rouble has more strengthening to do vs. the USD and RUB


  • Geopolitical: US sanctions end up with damaging retaliation from Russia (note this news just came out as US lawmakers passed the bill)
  • Monetary: CRB more dovish than expected
  • Harsh and big reversal of oil
  • Huge spike up in global yields, i.e. US10s getting back to over 2.40%/2.60%... could potentially cause a risk-off in EM
  • Continued momentum upside on euro and/or harsh bounce-back in the USD


Entry: 69.50.

Stop: 76.58.

Target: first target 67.52; second target 62.98.

Time horizon: 0 to 12 months.

EURRUB 5-year
 Source: Bloomberg

Emerging Market FX Index & EURRUB & USDRUB – note how depreciation in rouble has been much worse than rest of EM FX, despite cuts of 100bp from Brazil, surprise 25bp cut from South Africa (i.e. its yield starve relative world, it looks better)
 Source: Bloomberg

Oil vs. EURUB & USDRUB – note how rouble depreciation has coincided with the lift off and great price action we’ve seen from oil
 Source: Bloomberg

–  Edited by Gayle Bryant

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Logich Logich
Very wide stop and not a very good win/loss ratio - is the figures correct, and if so, can you elaborate??


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