Brent Crude vs Russian Ruble - Brent RUB Trading

Advantage

It should be noted that the &BRENT/RUB spread instrument is used for the fundamental analysis of Russian Federation (RF) macroeconomic policy and trading inside a price channel: buying near the support line, selling near the resistance line.

Characteristics of the personal composite instrument &BRENT/RUB:

• The source of the RF Central Bank official reserves are the super-profits from the sales of energy resources. Oil export accounts for 66% (2014) of total energy resource exports. Revenues from energy industry account for 51% of the federal budget revenues, which allows predicting the trends for increasing the public sector financing and economic stimulus programs;
• The determinants of the long term rating of the Russian economy are the world oil prices and the official reserves of the country, which ensure the stability and creditworthiness of the economy. Therefore, increasing energy resource prices can result in the ruble strengthening, while falling energy resource prices have the opposite effect. Over the last year the Brent/Ruble correlation reached 70%. From November 2012 to September 2014 the Russian ruble lost 22% of its value, and came close to the mark of 39 rubles per US dollar. It is noteworthy that during the same period BRENT crude oil has fallen in price from 128 to 98 dollars per barrel, i.e. by 23%. The comparability of these two values confirms the possibility of the "mean reversion" strategy.

You can find the theoretical foundations for the index formation in the “Application field” section below.