US news. The results of the meeting of the US FRS have cast down on the world markets, which have not received any help, but heard that the United States economy is officially recognized as “ailing”. It is obvious that due to this almost all assets have gone down in value, except for dollar.
Russian bond indexes, as admitted by the experts of Forex Academy and Masterforex-V Stock Exchange and Futures Trade, have decreased by 8% in the condition when ruble rate keeps falling. 32 rubles are currently exchanged for a dollar, and 43 – for a Euro. What shall traders and investors expect amid negative market dynamics and US news?
For investors: what is the FRS influence on world economy?
Specialists were generally expecting that FRS would announce the start of government bonds replacement program. The program foresees the replacement of the government bonds that are at FRS command by more durable bonds: purchasing securities with a thirty-year term instead of the ones with a six-year term or a short-term of three years. But none of the market players could assume that US economy would be estimated as so “flawed”.
A Canadian expert of International Academy and Masterforex-V Stock Exchange and Futures Trade Yevgeniy Olhovskiy pays attention to the fact that the comments of the Federal Reserve System representatives about American economy are mostly negative. The expert supposes that in such a way the FRS officially demonstrates its disbelief into complete rehabilitation of national economy, at least in the years to come. Moreover, these comments show that there is a high likelihood of falling, but they do not mention the possibility to increase liquidity in future.
Meanwhile, the Head of FRS Ben Bernanke is concerned about the situation. But it’s a pity that nobody could suggest any effective measures for national economic recovery, not even in the perspective. This may be caused by disagreements between Open Market Committee presidents when three out of ten were against the taken decision:
■ WB Head opinion. The World Bank Head Robert Zoellick has also fueled the flame, having claimed that poor economic conditions of the countries with advanced economy will have a negative impact on developing countries;
■ Moody’s reaction. This was immediately followed by the reaction o finternational rating agency Moody’s, which has lowered the ratings of the Bank of America, Citigroup, and Wells Fargo. World bond indexes have “responded” instantly by making a “common” down leap;
■ Russian markets reaction. Thus, for example, MICEX index has lost more than 100 point “in weigh” within one hour (dropped by 7.8%), coming to the level of 1389.43 points. RTS index has dropped by 8.6% and currently amounts to 1387.86 points. At the same time dollar, on the contrary, rises. As of yesterday, dollar has gone up in price so much in relation to Euro that it has reached a maximum, after February, level. The rise has amounted to 0.9%, having reached 1.3448 dollars per Euro. In relation to ruble, dollar has gone up in price by 58 kopecks, having amounted to (data as of Thursday, September 22) 32.05 rubles per dollar. Dual-currency basket has also gained in price – by 35 kopecks, which amounts to 37.04 rubles.
Experts opinion: what is to be expected at the market?
Andrei Polishevich, the General Manager of Forex Trend company admits that this dual-currency basket cost mark is in close proximity of the Central Bank of Russian Federation floating range. Therefore, there is a strong possibility that investors and traders will not be extremely active in the nearest future, expecting large-scale interventions:
■ quotations fall. Stock exchange quotations have also fallen, including quotations for gold, which 2.2% cheaper yesterday, having reached 1742.2 dollars per troy ounce. Silver currently is 6.8% cheaper.
■ oil prices. The price of Brent oil has dropped by 4.3%, having currently stopped at the level of 105.64 dollars per barrel.
Liquidity remains problematic. Thus, repo market interest rates are not even close to lowering to the previously gained level of 4.75-5% per annum. Yesterday banks borrowed 91 bln. rubles of direct repo from 250 bln. rubles, which were suggested by the Central Bank of at the direct repo auction. Andrei Polishevich supposes that this situation will remain at least till the end of this month.
A leading expert of Yevgeniy Olhovskiy also claims that oil price can influence ruble in the nearest future. Provided that Brent price remains at the level of 100-110 dollars per barrel, Russian ruble is not likely to drop rapidly. However, if oil price declines to 80 dollars per barrel, ruble can drop to 35-36 rubles per dollar. There is a high likelihood that during next two weeks Russian national currency will go down in value in relation to dollar to the level of 33 rubles per dollar. This can lead to the events that happened three years ago when there was a mass buying up of foreign currency.
In this case much depends on a regulator, who has to take measures against speculations on currency trading in order to avoid mass switch to currency. Moreover, the National Bank, learned by the painful situation at the end of 2008, shall not switch to gradual devaluation.
Nevertheless, currently there are no serious reasons to fear that the same situation may happen, for Russians are not trying to transfer their deposits into currency as quickly as possible, and banks do not suffer from the crisis of “bad debts”. Consequently, they do not need global support in paying large debts.
The rate of Russian ruble. According to the experts of the Department of Masterforex-V Trading System, long-term perspectives for the rate of ruble are not very optimistic.
When sloping channel MF and pivot MF are broken, bullish impulse wave of higher wave level (Mounthly) is formed at forex market. This wave has the features of Mounthly wave с(С). On the way of falling Russian ruble is to meet a significant level of resistance – pivot MF – at the point of 33.056. If Russian ruble breaks and fixes at this level, it can clear the way for possible renewal of historic maximum of 36.51 (see the chart). Only when pivot MF is broken at the point of 28.63, trend reversal or fixation of the rate of Russian ruble can be discussed:
Oil prices. Oil price maintains its medium-long-term trend, as explained by the experts of . A significant level of support – pivot MF at the point of $67.15 – is placed on the way of downward motion. It is worth mentioning that according to the most recent technical analysis of Masterforex-V, this forming bear wave is only the first wave of possible long-term bear motion, for when it finished, bullish wave – “MF moment of truth” – is to be expected. Breaking pivot MF at the point of $100.62 will clear the way for possible renewal of historic maximum of $114.83 (see the picture):
The Editorial Board of “Market Leader” magazine, jointly with experts of Forex Academy and Masterforex-V Stock Exchange and Futures Trade, holds a questionnaire in the traders’ forum: in your opinion, is the 2nd wave of crisis likely to happen?
• yes, the 2nd wave of crisis is very likely to happen – influential politicians and economists are right;
• no, the 2nd wave of crisis has already finished, politicians and economists are executing a political order, producing hysteria at the markets.
