Russia FX Beat - October 3, 2017

> Today's focus. Quiet day ahead. Can the dollar rally persist?
> Global trigger: Euro political risk? Positive dollar momentum continued to build yesterday. Today, with little of importance on the schedule, the currency should stay well supported.
Within the eurozone, there has been a detectable, although not dangerous, pickup in sovereign risk aversion. This stems from the independence referendum held in Catalonia at the weekend. As a consequence, Spanish government bond yields have spiked. This has arguably reintroduced a small political risk premium into the euro, pushing it lower. However, we do not expect this to weigh on EUR/USD for a long period.
Recent dollar gains have taken both EUR/USD and the DXY Index close to important levels. For EUR/USD, we are watching the 1.1660 area of support and for DXY resistance at 94.15.
As we outlined last week, we see scope for EUR/USD to fall to the 1.15-1.16 area in coming weeks but to settle closer to 1.18 by year end. Over the short term, comments by Fed Chair Yellen tomorrow will be a focus for investors.
> Bottom line. For today, we expect EUR/USD to hold above 1.17 and quite possibly grind higher toward 1.1750.
> Regional trigger: EM FX downdraft. The ruble was generally pressured weaker yesterday, in line with the negative EM FX tone in the face of the appreciating dollar. For the time being, USD/RUB is holding within a well-established range, which is unlikely to be disrupted today.
To the upside, we note the convergence of the 50, 100 and 200d moving averages for USD/RUB near to 58.50. This represents the key resistance level and one that if breached would suggest a more bearish ruble outlook. To the downside, USD/RUB support today is seen at 57.45.
Meanwhile, the sharp reversal in oil prices continues, despite supply disruptions in Libya. Pressure on Brent is coming from both its negative correlation with the dollar and also evidence that OPEC output picked up slightly in September. Today, Russian Energy Minister Alexander Novak is due to give comments ahead of the start of Russia's Energy Week forum. Yesterday, the minister said he views an oil price in the $50-60/bbl area as appropriate.
> Bottom line. As outlined above, USD/RUB is currently in the center of a broad 57.50-58.50 range. We have a slight preference for it to edge above 58 today.