Russia FX Beat - July 4, 2017

> Today's focus. US markets shut, North Korea missile test.
> Global trigger: US holiday. The dollar enjoyed a positive day yesterday, rising against all other trading currencies. Volumes were reportedly muted, with activity curtailed by today's US holiday.
The dollar gained from early in the session, with an upbeat ISM manufacturing survey later in the day adding to the positive mood. Within the survey, production, new orders and employment all rose sharply.
Today's trading session should be muted given that the US is shut. European markets won't have much more than a couple of ECB speakers and Eurozone PPI data (12:00 Moscow time) to chew on.
> Bottom line. EUR/USD should settle in a 1.1350-1.1375 range on quiet trading.
> Regional trigger: Oil tests resistance. An eighth straight daily rise in the Brent price means that oil is up by almost 12% since its intraday low on June 21. Over the same period, USD/RUB is lower by less than 2%, a good illustration that the ruble is no longer moving in lockstep with energy prices.
Oil now faces a sterner test as to whether it can continue its recovery. Brent at $49.50/bbl marks the 50% retracement of the decline that commenced on May 25. Just above this lies the 50d moving average at $49.60/bbl. Oil might come under pressure today on a report from Bloomberg that OPEC output rose in June to its highest level this year (32.55 mln bpd).
Russian President Vladimir Putin meets with Chinese President Xi Jinping in Moscow today. The meeting comes on a day in which North Korea reportedly tested an intercontinental missile for the first time. North Korea has said that it will make an "important announcement" on the topic.
With Russia's annual dividend season upon us, it would not be a surprise if the ruble forges its own path over the next few weeks. The conversion to FX by recipients of ruble-denominated dividends may have played a role yesterday in USD/RUB's outperformance. However, as we note above, the dollar was well supported yesterday across the board, which was probably the more important factor.
> Bottom line. Risks to USD/RUB are quite balanced today. At a push, we prefer a test to the downside, toward 59.