22.10.2020: Progress on US stimulus talks to support RUB (Brent, USD/RUB)

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Oil prices remain under moderate pressure on Thursday morning. Brent crude edged lower to the middle of the current trading range. Meanwhile, the ruble closed yesterday’s session with gains. However, its start on Thursday is less impressive. Optimism of the ruble bulls faded amid stalled negotiations over the US stimulus package.
Investors are still concerned that the coronavirus pandemic will continue to limit fuel demand. The OPEC+ my step in and take some measures to balance the market only in late November. Until then, crude prices will stay under pressure.
Oil bulls were discouraged by the official industry data released yesterday. According to the US Energy Department, oil inventories slightly increased last week. At the same time, the EIA report showed an unexpected rise in gasoline stockpiles, while the production capacity of US oil refineries declined. The data reflected a drop in fuel demand mainly caused by Hurricane Delta. The market reaction to this report was rather negative. The overall worsening of the global sentiment also restricted crude prices.
Oil slipped to the middle of the current trading range between 40.00 and 43.00 dollars per barrel. Today, traders’ sentiment has improved, and they tend to open more long positions on oil. In the morning session, Brent futures contract with the nearest expiration edged up to 41 dollars 80 cents per barrel. WTI futures followed a similar trajectory. As a result, North American grade settled just above 40 dollars a barrel.
Despite a moderate uptrend in the early trade, market participants will hardly stay positive during the day. Oil is expected to trade flat near the current levels. But if the risk appetite deteriorates, Brent may easily slide below the area of 40.00-41.00 dollars a barrel.
Global market sentiment was largely negative in the morning session. Investors are disappointed by the lack of progress in negotiations over fiscal stimulus in the US. Democrats could be deliberately holding up the compromise on the deal so that they can resume the talks later after gaining control over the White House.
In the meantime, sell positions prevailed on the ruble early in the day. Thus, the US dollar may easily win back its previous losses and settle near the level of 77.00 against the ruble. Amid a strong risk aversion, the dollar/ruble pair may head for the upper boundary of the current range near the 77.50 mark.
Meanwhile, in the previous session the ruble did not react to any negative drivers. It downplayed the fall in oil prices and advanced steadily against the US dollar. Thus, yesterday the Russian currency tested a new high of 76.60 against the US dollar.
Notably, the nearest support level for the dollar/ruble pair is located close to the 76.50 mark. If the price breaks through this level, then it may move further to 75.40.
From the technical viewpoint, the ruble bulls have good chances of pushing the pair down to this level or even lower. The situation will depend on Democrats and the progress on stimulus talks. If a new economic relief package is approved, the ruble will gain additional support. Otherwise, the US dollar will definitely regain ground.
Apart from the stimulus package, market participants will keep a close eye on presidential debate between Donald Trump and Joe Biden. Investors will also anticipate weekly data from the US labor market.

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