Russia President, Vladimir Putin announced he’s recognizing two self-proclaimed separatist republics in eastern Ukraine. The Russian president signed aid and cooperation pacts with separatist leaders at a Kremlin ceremony and recognized the independence and sovereignty of the Donetsk People’s Republic and the Luhansk People’s Republic.

Although investors' fear that Russia could soon invade Ukraine were heightened, we think the conflict is ending soon. If you check out the positions of hedge funds trading the Russian Ruble, you will realize a strong correlation between their long-short position versus the strength of the Russian Ruble.

From 2016 to 2018, the hedge funds are having a net long position on the Russian Ruble. At the same time, the Russian Ruble had strengthened by 35%. In Apr 2020 when oil prices have fallen into negative territory and Russian Ruble at its weakest, hedge funds started to placed their long position. From there onwards, the Russian Ruble had gained 18% against the USD. Considering the most commonly used leverage ratio for trading USD/RUB is 20x, this trade will bring a 360% return for hedge funds trading in the right direction.

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This time, when every investor is afraid that the situation will worsen, hedge funds had switched their short positions into net long positions. A stronger Russian Ruble could only mean 2 things. Either Russia had beaten the US or the conflict de-escalated. Personally, I don't think the US will go into a war with Russia so the conclusion is clear, this conflict is ending soon.

To check out how the position of hedge funds, institutional players, and retail investors on the Russia Ruble, you can check out this tool here: USD/RUB Futures Position