Historic Crash of the Russian Rubble Causes Mayhem & Trading Opportunities

2,000 pips in one single day!

Tuesday December 16, 2014 was not your typical market day thanks to the Russian Ruble. The currency pair made a spectacular fall and the event could mark a historical day.

The Ruble for instance plummeted against the US Dollar from 58 to above 78 in intra-day trading.

16- 12- 2014 USDRUB
(image from Bloomberg)

Many currency pairs and trends would be seriously jealous of the movement this pair has made in just one day of trading:

  • EURUSD (EU) down trend lasted 1750 pips but it took 7 months;
  • USDJPY (UJ) uptrend lasted 2000 pips but it took close to half a year as well.

The US Dollar Ruble (USDRUB) did the same as the EU and UJ but all within a couple of hours (instead of months). Let us examine this sensational price movement more closely.

LAST YEAR’S PRICE MOVEMENT USDRUB

The USDRUB has been in uptrend since the beginning of September. Price started off that month at around 37, which was only a tad higher than the consolidation between January and August (price was bouncing back and forth between 33 and 36).

16- 12- 2014 USDRUB 2
(image from Bloomberg)

Here is how the trend accelerated:

  • End of September price was close to 40;
  • End of October price was at 43;
  • End of November price was near 50.

In the last 2 weeks price has moved from 50 all the way up to almost 80 in intra-day trading. The sure but slow rise has transformed into a rocket. What just happened?

ECOPOLITCAL FACTORS REIGN

The drastic interest rate increase (to 17%) that the Russian Central Bank had implemented one day earlier did not manage to stop the Rubble decline. But perhaps a freeze of capital outflow from Russia could help dampen the fall, but nobody really knows. Economic pundits mostly explain the RUB weakening due to the economic sanctions from the West and the sharp drop in oil prices.

FOREX TRADER’S PERSPECTIVE

Certainly the high levels of volatility offer interesting opportunities but Forex traders need to be cautious in these times. When attempting to capitalize on big movements, it is important to realize that the stakes are high too.

Russia’s Central Bank will (probably) try to strengthen the Rubble against the USD and other currency pairs. Whether it will be successful remains the question but its attempts could cause big fluctuations. If one does attempt to trade it, stay sharp and smart and above all don’t be too greedy.

A TRADER’S AMAZING 1,000 PIP TIMING

The USDRUB rise has created many winners and losers. Let me share with you the story of one the winners: a Winners Edge Trading mentoring trader (will use his abbreviated name Fred for this post).

Fred never ever traded the USDRUB – until today. Fred noticed an interesting long setup on the USDRUB and Fred decided to take the trade… exactly on the day that the USDRUB moved 2,000 pips. Fred said that he “just took the trade”, sold it after a nice profit and then even made a re-entry (!). On both trades Fred made a total of 1,000 pips. Wow!

If perfect timing exists, then this is the perfect example: never traded the USDRUB except on the day of the 2,000 pip move and above all made 1,000 pips on the dramatic rise in 2 trades.

A historic story – thanks for sharing Fred!

Drop us a note what you think of Fred’s miraculous choice of trading the USDRUB long, I am sure he will appreciate the congratulations. 🙂

Thanks for sharing and wish you Happy Hunting!

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