Eastern European emerging markets highly correlated to the Russian ruble
Which currencies can forex traders turn to if they want to profit from the movements of the Russian ruble? They can look to Eastern Europe with the Polish Zloty (PLN), the Hungarian Forint (HUF) and the Czech Crown (CZK).
Russian ruble (RUB)
Once Russia invaded Ukraine, there was no turning back for the Russian clock and the couple USD / RUB. The Bank of Russia attempted to stop the ruble from bleeding for a few days when the pair hit an all-time high of 85.98. However, Russia was removed from the SWIFT financial messaging system last weekend. Therefore, Russia could not conduct financial transactions with many countries. The Russian ruble tumbled and the USD / RUB pair rose to an all-time high in forex so far at 118.125. The Central Bank of Russia admitted and said it could not prevent the collapse of the Russian ruble.
USD / RUB daily chart
Zloty polonais (PLN)
The USD / PLN has also risen since the invasion began. Note that the correlation at the bottom of the screen is +0.93. A reading of +1.00 is considered a perfect positive correlation, where the 2 assets move in the same direction 100% of the time. A reading above +0.80 is considered a strong correlation.
However, unlike USD / RUB, USD / PLN did not reach new all-time highs today at 4.3078. The USD / PLN pair has not traded this high since March 2020. There is also a 1-year trend line just above today’s highs and the 127.2% Fibonacci extension of 2020 highs. Since November 23rd 2021 to February 10 lows of 4.2834. If USD / PLN manages to break through into record territory, the next resistance level is the 161.8% Fibonacci extension from the same time frame at 4.3841. However, note that the RSI is in the overbought territory (above 70). Therefore, the premium may be due for withdrawal. First support is at the previous high of 4.2042, then Monday’s low at 4.1046, which is also the 50% retracement level between the Feb 10 lows and today’s highs.
USD / PLN daily chart
Hungarian Forint (HUF)
The USD / HUF chart is very similar to the USD / PLN chart. The USD / HUF pair has been rising since the invasion began and has stalled today at all-time highs near 340.67. The correlation coefficient between the USD / HUF and the USD / RUB pair is also +0.93. However, the price of the USD / HUF pair has broken through the ascending trend line that dates back to March 2021. If the price reaches a new all-time high, resistance is at the 161.8% Fibonacci extension from the highs of December 15, 2021. a February 7 low, near 349.84.
Note that the RSI is also overbought. Support is seen at the previous high of 333.46 and then Monday’s low at 323.82, which is also the 50% retracement level between the Feb 7 lows and today’s highs.
USD / HUF daily chart
Czech crown (CZK)
The chart for USD / CZK looks a bit like that of USD / PLN and USD / HUF, but there are many differences. The main point is that the correlation between the USD / CZK and the USD / RUB pair is +0.94. USD / CZK rose today but stopped at a high of November 26, 2021 near 22.9325. The resistance above is found at the March 2021 uptrend line near 23.2000 and the 50% retracement from the all-time highs in March 2020 to the lows on May 25, 2021 near 23.3973.
Note that the RSI is overbought, indicating that the pair may be ready for a pullback. First support is Monday’s low of 21.9563, which is also the 38.2% Fibonacci retracement level between the Feb 7 lows and today’s highs, hence the 50-day moving average at 21.6870.
USD / CZK daily chart
The Russian ruble has fallen on forex since the beginning of the invasion of Ukraine and crashed since Russia was removed by SWIFT. However, traders looking to take advantage of the rising USD / RUB pair can look to USD / PLN, USD / HUF or USD / CZK. These Eastern European emerging markets all have a strong correlation with the Russian ruble and USD / RUB!
By Joe Perry, CMT, FOREX.com »Official site
Disclaimer: The information and opinions contained in this report are provided for general information purposes only and do not constitute an offer or solicitation to buy or sell any forex or CFD exchange contracts. Although the information contained herein comes from sources believed to be reliable, the author does not guarantee its accuracy or completeness and assumes no responsibility for any direct, indirect or consequential damages that may arise from anyone who relies on such information.