Forex in January: dollar will strike again. Forecast for EURUSD, EURGBP, USDCAD, USDSEK, USDCHF и NZDCAD as of 30.12.2021

The seasonal factor is not the best ground for making investment decisions in Forex. Nevertheless, if to add fundamental factors to the statistics, the result will be a welcome surprise. Let’s discuss the Forex outlook and make up a trading plan for EURUSD, EURGBP, USDCAD, USDSEK, USDCHF and NZDCAD.

Monthly G10 currencies fundamental forecast

Appetite comes with eating. Statistical analysis with fundamental components once again pleased its fans in December after an impressive 27.4% addition to the deposit in November without the use of leverage. Yen sales against the euro, British pound and Swiss franc brought 8.2% in total. Over the past two months, traders have become 35% richer. Those who used 1 to 100 leverage increased their money 35 times. Forex makes dreams come true!

The main favorite of January is considered to be the US dollar. Since 1975, it has grown against the CAD, the euro and the Swedish krona on 30 out of 46 cases. Only the kiwi, yen and pound offered more or less serious resistance to the greenback. January is the best month for the dollar and the worst for the US stock indices. This suggests that at the start, the USD is actively used as a safe-haven currency during S&P 500 correction, which is very likely after the Santa Claus rally.

Rise-fall periods

 

Source: BoE, LiteFinance calculations.

In terms of medians and averages, the New Zealand dollar and the Japanese yen are among the leaders in January, while the European currencies are among the outsiders. Closing red, the euro and the Swedish krona lost about 3.1% of their value on average, while the Swiss franc lost 3%.

Averages and medians

  

Source: BoE, LiteFinance calculations.

Price dynamics during rise-fall periods

Source: BoE, LiteFinance calculations.

The strengthening of the US dollar at the start of 2022 looks very likely due to the seasonal factor and low expectations of a federal funds rate hike in March. Currently, the odds are fifty-fifty, and if the rate starts to rise, the greenback will strengthen against all currencies. The reason for this may be the strong US jobs report for December and the further acceleration of consumer prices in the US.

Growth in US Treasury yields during a flight from safe-haven assets amid declining fears over Omicron, as well as the S&P 500 pullback, can support the USD index. The slowdown in the economy, corporate earnings growth, and the aggressive tightening of the Fed’s monetary policy are strong arguments for selling US stocks. Surely investors are going to take profit after the Santa Claus rally.

The yen’s position will improve only if the rates on US debt cease to grow, which so far looks unlikely. The pound can surpass the euro in January thanks to expectations of an increase in the interest rate at the first BoE meeting in 2022.

Monthly EURUSD, EURGBP, USDCAD, USDSEK, USDCHF and NZDCAD forecast

Thus, based on seasonal and fundamental factors, it will be profitable to sell EURUSD and EURGBP in January and buy USDCAD, USDSEK, and USDCHF. Statistics advise traders to pay attention to NZDCAD long trades. This may be due to the improvement in the epidemiological situation in New Zealand and/or to the stimulating policy of the People’s Bank of China, favorable for the currencies of countries for which China is a key trading partner.

     

Price chart of EURUSD in real time mode

The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteFinance. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.

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