27.10.2020: RUB unlikely to hold long at 75 vs USD (Brent, USD/RUB)

Oil tries to rebound after recent sharp losses, but the energy market remains pressured by negative factors. The ruble opened the day moving slightly lower against the US dollar. Further trajectory of the pair will be determined by the current background where there is a prospect for improvement.
Oil started this week in negative territory, with bears pushing the Brent quotes down to the range of 40-41 dollars per barrel. This is happening amid rising fears over the sluggish fuel demand. With coronavirus restrictions imposed all over the world, the demand for oil will remain subdued. At the same time, such fundamental factors as increasing supply in Libya seem to have more influence on the oil market. Besides, the rising number of active oil rigs in the US also weigh on crude prices.
Oil at 40 dollars per barrel seems enough to encourage US producers to increase the output. As for the OPEC+, the grouping is now facing a difficult choice. The members of the alliance can either cut production in order to maintain prices or boost it to keep the market share. Within the current agreement, the OPEC+ members may choose to save their market share. If so, oil prices will stay low for quite a long time.
Yesterday, Brent lost 2.8%, while WTI plunged by 3%. On Tuesday, oil quotes started an upward correction. Perhaps, prices got some support from the positive statement from the OPEC Secretary General who said on Monday that the worst is over for the crude market.
Brent futures for December was 0.6% up in the early session. At some point, the bulls managed to break through the level of 41 dollars per barrel. North American crude was following a similar trajectory. So, WTI contract with the nearest expiration was last seen trading below 39 dollars per barrel. In the course of the day, no major changes are expected in the oil market. Brent is likely to enter the range between 41 and 42 dollars per barrel. However, if the market sentiment deteriorates, Brent price can easily slip to the mark of 39.
Meanwhile, commodity currencies are gaining ground supported by a rebound in oil prices. The ruble was trading in a sideways channel on Tuesday morning, keeping close to the previous levels. The end of the tax payment period in Russia is a negative factor for the ruble. In addition, the rising political tensions weigh on the Russian currency. A recent Russian airstrike on the Islamist camp in Syria, which is supported by Turkey, can deteriorate the relationships bween the two countries.
In general, the ruble is holding steady, and investors did not flee from the Russian federal loaf bonds yesterday. At the moment, currency interventions carried out by the Bank of Russia serve as a local supporting factor for the ruble. Also, the risk appetite has slightly improved today. So, the ruble has a chance of strengthening against the US dollar. In this case, its first upward target will be the level of 75 per dollar.
The US dollar may fall below the level of 76, but this move is likely to be short-lived. The greenback may soon return to the channel between 76 and 77 rubles.

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