All countries have dealt with the pandemic’s challenges in different ways, and the echo of these decisions will be heard in their economic indicators for a long time to come. The main question that worries traders now is: what currency pairs are the best to trade in 2021?
Here are our top picks.
While the last year has been stressful for most currencies, it was a thrilling time for EUR/USD. There were several sharp ups and downs: first, the USD rose at the beginning of the COVID-19 pandemic because people started looking for safe-havens. Then, the Federal Reserve announced its stimulus measures, which devalued the USD and even raised concerns about the dollar’s future as the world’s reserve currency.
For now, EUR/USD is at the crossroads. The long lockdown has been pulling the currencies down, but in Forex, the stronger the trend, the more dangerous it is to follow. Experts say that in the short term, the US dollar could rise to 1.1600 if there will be a catalyst to overcome the 1.2000 level. However, there is also a chance that the dollar could be in for a stronger recovery.
In the end, the rates will depend on how the American and European economies would recover after the pandemic. As for late March, traders’ sentiment for this currency pair on the IQ Option platform looks like this:
USD/CAD has a big chance to become one of the most volatile currency pairs in 2021. The reason for this is the increase in oil prices to $60 per barrel, which has boosted the CAD. However, the scene might change if the economy fails to reopen: for example, a new virus mutation could affect the oil prices, and people would opt for the safer US dollar.
USD/CAD trades at 1.2556 as of late March, and if the USD selling goes on, CAD could make a push for 1.2000.
The British pound had a hard time in 2020 due to Brexit and the virus. However, the currency is now straightening out because the UK is implementing a vaccination program more successfully than its neighbors in the Eurozone.
The Bank of England kept its key interest rate at 0.1 percent and claimed not to take any further stimulus measures. The British economy may soon open up to European countries, which will give a bigger move for the GBP.
EUR/GBP is currently trading at 0.8605, but remember that this figure was 0.7000 prior to the Brexit referendum. If the local economy keeps working on the vaccination challenges, the currency could get closer to its previous valuation.
Swiss Franc is considered a safe-haven currency. Normally, USD/CHF is a very stable and predictable pair to trade… but 2020 has changed that, too. During the global pandemic, investors would funnel money into the stable economy — this, along with the ongoing bearish trend of the Dollar Index, leads to deflation and the subsequent negative interest rates and interventions from the Swiss National Bank.
Over the past year, USD/CHF went down by 11.8% from 0.98 to 0.89 and will likely remain between 0.88 and 1.02 throughout 2021. That would make this pair a nice choice for scalpers.
In 2020, AUD/USD was #1 in the top 10 pairs with the highest daily range. It experienced a bullish rally, after which the AUD rose by 42.5% to 0.77 — the numbers that are more likely to be seen in the cryptocurrency market rather than in the fiat currency market. This happened due to 2 things:
- Successful implementation of anti-coronavirus measures in Australia;
- Economic growth due to China’s demand for Australian goods (iron and copper).
What does 2021 have in store for the Australian currency? Depends on the country’s relations with China and the United States. The thing is, US President Joe Biden plans to pursue a policy of countering the growing influence of China on the world economy and, probably, revive the Trans-Pacific Partnership (TPP), of which Australia used to be a member. China is unlikely to appreciate it; in addition, the country is moving into a post-industrial economy, which means less demand for Australian goods.
Thus, if Australia finds a way to negotiate with China, the price could rise again to 0.87 or even to the top resistance at 0.94. Otherwise, the year will be difficult for Australia’s national currency while the US dollar begins to recover.