Even though there has been an abundance of negativity surrounding the Russian outlook, Vladimir Putin has shown the world that he can steer the economy while under immense pressure. Despite Western sanctions, Putin has maneuvered deftly by creating new strategic partnerships and pivoting Russia’s focus towards more friendly economies.Recent deals with India and Turkey cap off years of cozying ties with Beijing and the Middle East. its new strategic initiatives in place, Russia is poised to reap the rewards of Putin’s aggressive expansion as it prepares to rebound from the latest economic crisis more empowered and emboldened. Even though there have been a multitude of forces working against the Ruble, these recent developments may prove enough to see momentum turn in the currency’s favor over the medium-term.

The Epic Pivot

Russia’s long-discussed pivot eastward is having dramatic implications as far as the country’s forward guidance. Besides moving away from using the US dollar and increasingly replacing it with Yuan-denominated trade, pipeline projects designed to cut costs of energy delivery across continents will see Russia’s strategic influence expand over time. The latest announced project to make Turkey a global energy hub could have huge benefits for Russia at a time when it is attempting to wean its dependence from lucrative European gas contracts. The famed Turkish Stream pipeline is beginning to materialize after a deal was reached between Putin and Turkish Prime Minister Recep Tayyip Erdogan earlier in the month.  Russia is also restoring old ties with India after signing major defense deals along with the recent buyout of state-owned Essar Oil.

Despite Putin’s successes abroad, the Russian economy remains under pressure due to ongoing inflation that remains above target and interest rates that are effectively choking off small and medium-sized businesses.However, steady progress is being made on both these fronts, paving the way for a significant rebound in Russian economic activity over the medium-to-long term.After peaking in the first quarter of 2015 near 17.00%, inflation has come down to just 6.40%,Even though interest rates are falling slower, the latest cut back in September to 10.00% from 10.50% is a clear indicator of progress from the Central Bank.Additionally, should the tailwinds propping up the Ruble remain intact, gains in the currency could potentially help moderate inflation even further.Given that the Russian economy is approaching an emerging exit from a recession, the Ruble could find itself storming higher as the conditions for growth advance.

Technically Speaking

Aside from the pair’s sensitivity to monetary policy, one of the foremost drivers of USDRUB is oil prices. Thanks to Russia’s energy economy status, with the nation drawing nearly 25% of its annual GDP from energy production and sales, the Ruble is highly correlated with oil prices.Recently, that correlation has strengthened significantly on the heels of a proposed OPEC output freeze.At present, the correlation coefficient for USDRUB versus WTI crude oil stands at -0.8167, implying a strong inverse relation. That means, should oil prices continue to climb from their current levels, the USDRUB pair may continue its prevailing downtrend.Should oil gains stop in their tracks however, the Ruble may find its own momentum stalled.

Looking beyond oil prices, recent price action suggests that the downtrend prevailing over the last 10-months is set to continue. The emerging descending triangle pattern is a notoriously bearish formation that suggests if USDRUB breaks below key long-term support at 61.7650. Any break above the downward trend line could imply the pattern is breaking down and USDRUB is not set for a breakout.Nevertheless, standing in the way of any rally is the 50-day moving average which coincides with the trend line. If overcome, the 200-day moving average trending lower is also acting as resistance. Though the USDRUB pair may be approaching oversold territory according to the Relative Strength Index and Stochastic Oscillator, ongoing Ruble momentum suggest trend continuation.