G10 currencies price forecast 24 March 2021

2021-03-24

Forex: how to catch fish in muddy waters? USDCAD, EURCAD, EURJPY, EURCHF, GBPJPY and GBPCHF forecast for six m…Dmitri Demidenko

Several G10 currencies have already set trends for 2021, while others are ready to break the current trend. What currencies are we talking about? Let’s discuss the market outlook and make up a trading plan for [USDCAD][1], [EURCAD][2], [EURJPY][3], [EURCHF][4], [GBPJPY][5], and [GBPCHF][6]

Fundamental G10 currencies forecast for six months

As in life, there will always be a place for both optimists and pessimists in the market. Pessimists say that it will not be possible to defeat the pandemic with the current vaccination rate even in 2022. Optimists draw attention to the fact that the OECD has raised its 2021 economic growth forecast by as much as 2.5% and sincerely believe that the COVID-19 situation will improve in the summer. How can an ordinary Forex trader make a profit with such a variety of opinions, which resembles muddy waters?

First, you need to understand that both optimists’ and pessimists’ favorite for today is the US dollar. To achieve global immunity, it is necessary to vaccinate about 4.5 billion people (75% of the world’s population). So far, 450 million people have been inoculated, so the chances of eradicating COVID-19 by the end of 2022 look slim. If so, investors will buy greenbacks as a safe-haven currency anyway.

On the other hand, at the current rate of vaccination, the UK will cope with the pandemic by mid-summer, the United States by the fall. China has already done so. Large economies will recover much faster than others, so the improvement in the OECD forecasts looks logical. The more optimistic estimates are based on the boost of economic growth in the United States thanks to large-scale fiscal stimulus. Indeed, the US economy will be larger by the end of 2021 than expected before COVID-19. This is a good reason for the greenback strengthening.

Difference in GDP forecasts for 2021

Source: Financial Times.

GDP forecasts for G10 countries

Source: Nordea Markets.

At the end of 2020, there were many hopes for a boost in the UK and the Eurozone economies. However, the estimates had to be reduced due to the feuds over vaccines and Brexit. In contrast, US GDP estimates have risen. Improved forecasts for Australia and Canada are also noteworthy. Their currencies are supported by the commodity market, as well as China and the United States, which are their main trading partners.

In my opinion, the loonie will look better than the rest of the G10 currencies in 2021 and will be a real competitor to the greenback for several reasons. First, despite the oil correction, AUD’s medium-term prospects remain bullish: the US economy’s full opening and high demand for gasoline in the summer will help recover the [Brent][7] and [WTI][8] uptrend. Secondly, the Bank of Canada is the first of the regulators of developed countries to normalize monetary policy. Finally, Ottawa will be one of the main beneficiaries of Joe Biden’s fiscal stimulus.

Impact of US fiscal stimulus on world economies

Source: Financial Times.

If the AUD and the USD look like Forex favorites, then I still consider the Japanese yen and the Swiss franc to be outsiders due to the increased sensitivity of these currencies to the growth of Treasury yields. As for the euro and the pound, these currencies have already hit a rough patch, but in a few months, the situation should change, which will allow us to buy [EURJPY][3], [EURCHF][4], [GBPJPY][5], and [GBPCHF][6] cheaper.

Price chart of EURJPY 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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