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Forecast for Canadian dollar as of 24 December 2020

2020-12-24

2020-12-24

Commodity currencies try their luck. Forecast for USDNOK, USDRUB, and USDCAD as of 24.12.2020Dmitri Demidenko

The global economy’s fast growth, higher demand for high-risk assets, and growing interest in carry trade will agitate [USDNOK][1], [USDRUB][2], and [USDCAD][3] quotes in 2021. Let’s discuss the prospects of commodity currencies and make a trading plan.

Six-month fundamental analysis for Norwegian krone, Russian rouble,

and Canadian dollar

Donald Trump’s epoch is about to fade into oblivion together with its unpredictability, protectionism, and trading wars. The world can’t wait to be vaccinated, and the markets are ready to return to their normal state. It all means that central banks’ monetary policies will become the number one factor in Forex pricing again. The commodity market is growing fast too. Altogether, we can expect that commodity currencies’ prospects will become bullish.

Large banks speak more often about the start of the commodity market’s super cycle and draw analogies to the beginning of the 00ies when China’s appetite provoked a boom on the global commodity platforms. The global economy and oil demand’s rapid growth will help out the currencies of oil-exporting countries, such as the Canadian dollar, the Norwegian krone, and the Russian rouble. The OPEC+ policies will most likely change from stimulation to control: no one is willing to support the main rivals, the USA, through cutting their oil supplies.

The Bloomberg experts think that the Norwegian krone’s 2021 prospects are the best of all the G10 currencies. The consensus forecast says [USDNOK][1] quotes will drop 4% to 8.32. Norway’s economy didn’t suffer from the pandemic as much as its European peers. It is expected to drop by 3.6% in 2020 and grow by 3.4% and 2.6% in 2021 and 2022, respectively. Oil accounts for 50% of the Norwegian exports, and the Central Bank says it is ready to raise rates as early as in the first half of 2022.

Forecasts for G10 currencies ****

Source: Bloomberg.

The rouble’s prospects are optimistic too. Despite a smaller fiscal stimulus, if compared with other countries, the Russian economy turned out to be more stable in the pandemic period as its service sector’s share in the GDP isn’t as big as the one of its competitors. The Russian Central bank has kept the rate unchanged at a few consecutive meetings. At the same time, CPI growth may signal that the monetary expansion’s cycle has ended. Oil and global risk appetite growth will be supporting the [USDRUB][2] bears. This factor is connected with the rouble’s another trump - carry trade.

According to Bloomberg’s research, Q4 has become the best period for carry traders who invest in developing countries’ currencies since the beginning of 2012. Their portfolios grew by 6.7%. This trend is likely to continue in 2021.

 Carry trade efficiency

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Source: Bloomberg.

The rouble’s main problem is sanctions. As soon as the market heard about hacker attacks, investors recalled Russia’s interference with the US 2016 election, and the [USDRUB][2] saw the highest 2-day rally in the past nine months.

As for the loonie, its prospects look quite optimistic for a few reasons:

  1. The US economy, which is the biggest market for Canada, feels better amid a large fiscal stimulus
  2. The global GDP is recovering
  3. The Bank of Canada is ready to take no action for a long time

So, traders can expect that [USDNOK][1], [USDRUB][2], and [USDCAD][3] will keep trading down in 2021. The pairs should be sold on retracements with targets at 8.2, 69.5, and 1.25.

Price chart of USDCAD in real time mode

The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. 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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  1. my.liteforex.com/trading/chart?symbol=USDNOK&returnUrl=true
  2. my.liteforex.com/trading/chart?symbol=USDRUB&returnUrl=true
  3. my.liteforex.com/trading/chart?symbol=USDCAD&returnUrl=true