Rouble strength during an Economic Collapse

Analysis of Russian Rouble strength during an economic collapse.

Strongest performing currency this year : Russian Rouble.

This currency strength is one of the most bizarre occurences of the year (second only to the Russian invasion).  How does one explain this ?

After the invasion on Feb 24, the rouble started collapsing from 81, to reach 150 on March 7. 

But it actually started weakening 2 weeks earlier, on Feb 9, from 74.25.

After collapsing to 150, the strangest thing happened.  As Russian FX reserves in USD and Euro were frozen with a massive range of economic sanctions on Russia, the rouble began strengthening…. all the way back to 51 on May 25.

As a context, given the Rouble and Indian Rupee were at similar levels in Feb 2022, imagine the Rupee collapsing from 74 to 150 in 4 weeks, and then from 150 to 51 – this entire roundtrip in the space of 3 months.

With the Russian economy collapsing, and most large american and european companies exiting russia, the rouble should have continued falling.

From a fundamental perspective, this made no sense.

From an elliott wave perspective, it makes perfect sense.

On Feb 9 (2 weeks before invasion), at 74.25, the rouble completed a large wave 4 correction with a WX-Y Triangle and began it’s thrust up, culminating at 150.  Elliott Wave Triangles are penultimate waves and usually signal a final thrust in the direction of the larger trend, which will subsequently be reversed quickly.

This is exactly what happened.  After thrusting up to 150, it began reversing, all the way back to 51, a level not seen since year 2015.

Continue reading below.

Notice where the decline at 51 ended.  51 represents a zone of support at the 4th wave of one lower degree and 4th wave of 2 lower degrees, a common end to corrections.   This is likely the end of Rouble strength, and it should resume the larger trend of weakness in a 3rd wave.

The trend channel agreed with the wave principle.  Price tested the upper trend channel to the upside at 150, before reversing.

Outlook : The rouble is likely to move back into the trend channel range above 70 and higher, and over time to continue weakening.

Whether the low at 51.50 is all of wave 2, or just wave A of 2 is not possible to know at this stage.  In either case, next few years should see a likely test of the 150 level again.