What are some of the best opportunities in the FX market this year
2021 is undoubtedly a crucial period to trade currencies. Big profits are earned in turbulent times when volatility is skewed. Liquidity, correlation, and leverage are currently moving all asset classes aggressively and shaking off the weakest hands, which rippled these hostile moves to all FX pairs. Despite the distress, numerous opportunities have risen and some FX pairs should be kept on a trader's watchlist while feasible investment opportunities are to be revealed. The year 2020 is over, but the shocks that generated fissures in financial markets back then still linger in 2021 as a full recovery is still being dealt with.
USDTRY:
Emerging markets are currently showing many signs of weakness again. A reason for this fragility is the strengthening of the US dollar and the rising US interest rates. Investors have reduced their risk appetite lately while also the rising interest rates have increased the cost on economies that have large amounts of debt in US dollars. The Turkish Lira is still expected to depreciate further down as US interest rates are still on the rise.
USDCAD:
This pair is highly correlated to US interest rates and crude oil price fluctuations. If US interest rates head up to 2% by year end and crude oil fails to cheer the bulls, then a buy position in this pair will unquestionably add value to a long dollar portfolio.
USDCNH:
China's debt build up definitely ranks as one of the largest in recent history. This rapid growth in debt creates heightened financial risks for the Yuan. It is clear that the US dollar has weakened lately against the Yuan, however many alarming factors come into play for the long run. Experts are concerned that China's debt is surging at an unusual pace which typically leads to financial busts. In the long-term, China's rising national debt levels will create serious hazards. To fight off the consequences, asset deleveraging will be imminent and fatal to all asset classes, thus leading investors to shift their investments into the safe haven dollar.
EURNOK:
Norges Bank is expected to hike interest rates later in 2021. Higher interest rates with higher crude oil prices will certainly point to a stronger NOK. If crude oil tests the $67 price level again, then shorting the EURNOK would sound quite lucrative.
EURGBP:
The close geographical link and trade disagreements between Europe and the UK makes this pair difficult to trade and forecast. On a weekly chart, the pair is trading in a choppy range. The Euro might fail to hold ground on the long run, due to many confidence and political concerns that emerged in the Eurozone after the pandemic. If the Bank of England attempts to hike its interest rates when the Euro comes crashing down, short positions on this pair will be quite profitable.
GBPJPY:
Bank of England sees hopeful signs ahead for the UK due to their remarkable vaccination prowess. The road to recovery led the pound to realize significant upside moves in the 1st quarter of 2021. On another note, the gross short yen position by non-commercials soared from 13k contracts, a multi-year low, in the first half of January to 85k contracts as of April 6. Clearly, the GBPJPY chart shows that the pair might again visit its 2018 highs at 156. A probable 600 pip move upwards (from the current market price at 150) with a tight stop loss could be your finest trade.
GBPNZD:
Since mid-January 2021, this pair has been seen trending up in a near perfect bull channel. Although both the British pound and the New Zealand dollar strengthened against the US dollar when the stock market rallied in October, the pound seemed to have more aggressive buying positions. The pair has room to surge higher as the Bank of England announced that negative interest rates are not an option, conversely to the RBNZ considering sub-zero rates as of next year.
AUDUSD:
Despite the rising interest rates on the US dollar, the Australian dollar is holding ground tightly. For the first time in a few years, the economic growth in Australia looks promising. Iron ore export volume rose to 11% YoY for the month of April, which offers a fundamental reason for the pair to extend its bullish trend.
CADJPY:
BoC's relatively good outlook about the economy is a shocking plus for the loonie. The economic recovery in Canada is likely to persist. The massive monetary injections and rapidly rising debt are adding to the Yen's weakness. Also, if crude oil manages to get out of its current trading range with some upward momentum, this pair has the potential to go much higher.
NZDCHF:
This pair is mostly correlated to liquidity and risk fluctuations in the market. A risk-on mood benefits the perceived risky NZD, as money flows out of the safe haven CHF. Lately, market participants decreased their risky bets, which led this pair to tumble down. A continuation of the downtrend is still highly probable given the overvalued market.
This article was submitted by Royal.
