The Russian rouble that has been on a faster downward correction since the recent policy moves is headed for fresh multi-month lows with just a week to go for the bi-monthly monetary policy decision.
USD/RUB jumped to 57.21 on 5 June, its highest since 6 April, translating to more than 8% slide in the rouble since the 1 June central bank decision to do away with forex repos.
The one-year forex repo auction is a facility helpful for Russian firms to meet their foreign exchange demand. Now the cancellation of that has increased the demand for dollar and euro, weakening the local currency as authorities wanted.
Strong domestic currency is unfavourable for exporters generally, and that is even more important for Russia, which finds a major chunk of its funds from oil and natural gas shipments.
Since February this year, USD/RUB was on a declining trend and started stabilising by mid-April after hitting a 5-month low of 48.85. The rouble was up more than 47% from its late January lows of 72/$.
The reversal in the trend since 25 May has so far weakened the Russian unit more than 14%.
It was the central bank policy move that has helped the pair break above the 50-day moving average, and the of late, the upward cross of the 14-day moving average over the 50-day has produced an important bullish signal.
The pair is now testing the 38.2% fibonacci retracement of the February-April selloff, which is near 58.0 and the next level to watch will be 60.0, endorsed by the 50% line.
Above that 63.0 and 65.0 may be considered as two barriers but a decisive break of 60.0 will make the journey towards 70.0 easier.
On the downside, 54.30 is a crucial level, which if held, upward chances are stronger. Further down, 52.0 is a level to watch ahead of the yearly lows hit in April.
The market is now waiting for the 15 June central bank rate decision which is even more significant with the recent policy action on forex repos.
Russia slashed the main rate by a much larger than expected margin of 150 basis points at the 30 April meeting propelling the rouble weakness thereafter, so if the bank will add to the cuts at this month's meeting is what everyone is looking forward to.
First quarter GDP data will also be revised on 15 June. The March quarter had seen world's fifth largest economy contracting 1.9% on a year-on-year basis and any surprise in the revision will have the potential to impact.