Macro Monday Tactical Book: Shorting USDRUB – #SaxoStrats
- 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
Target: first target 57.78; second target 56.08.
Time horizon: 0 to six months.