Russia FX Beat - September 20, 2017

> Today's focus. Fed rate decision looms: dots, QT, Yellen.
> Global trigger: Fed decision. All eyes today are no doubt on the Fed announcement at 21:00 Moscow time. With markets pricing no chance of a hike and the Fed doing nothing to alter this expectation, there is no chance of any change to the current 1.25% rate.
The focus is therefore entirely on first, whether the Fed announces a start date to the shrinking of its $4.5 trln balance sheet, and second, the prospect for hikes in 4Q17 and 2018.
We expect the Fed to say that it will start to reduce its balance sheet by $10 bln per month from October 1. This should not be a shock for the market. We also expect the Fed to retain a projection for a 25 bp rate increase in 4Q but to reduce its estimate for 2018 to two hikes from three hikes previously.
With markets barely pricing in one hike over this period, this in theory should be positive for the dollar and US yields, yet equally, investors have long since stopped believing the Fed's forecasts.
The Fed statement and forecasts are due at 21:00 with Yellen's press conference starting at 21:30. For more, see our Federal Reserve preview, "Quantitative Tightening Set to Start."
> Bottom line. EUR/USD will range-trade into the Fed decision. The key level to watch is the prior high of 1.2092.
> Regional trigger: Ruble technical outlook. The dollar's performance was mixed yesterday, and despite briefly reaching a high of 58.39, USD/RUB ultimately settled flat on the day.
USD/RUB has established a clear upward trend over the past two weeks. This has taken it to a level that will prove harder to break above, and therefore, whether it can is important for the near-term outlook. First, USD/RUB must break beyond its 100d moving average at 58.42. Beyond this, the 200d moving average coincides with the top of its rising trend channel near 58.65. If USD/RUB can break beyond these levels, investors would be rewarded with a more bearish ruble setup.
Outside of this technical picture, tonight's Fed meeting will be very important for broad dollar sentiment. In addition, the Russian tax period commences this week and so it is certainly possible that exporters will use any USD/RUB rise toward 58.50 to sell into.
On the data front, Russia sees weekly CPI today at 16:00, while US EIA oil inventory data is due at 17:30.
> Bottom line. USD/RUB is eyeing 58.50 but awaits Fed drama.