Q1 2022 Top Trade Opportunities
Looking into the opening quarter of 2022, there seems a high threshold for exuberance. That descriptor of sentiment ('exuberance') should relay the difficulty of sustaining the charge that speculative markets have enjoyed post-pandemic.
The Australian Dollar has struggled to make good on its pivot away from dovish policy extremes at the RBA, its home central bank. Governor Philip Lowe and company began scaling back Covid-linked asset purchases and unceremoniously ended a policy of capping the three-year bond yield.
As the calendar turns to 2022, the slate is wiped clean of the buoyant enthusiasm that carried risk markets higher through the second half of 2020 and all of 2021. Aggressive fiscal stimulus is now in the rearview mirror, while central banks globally have begun to roll back asset purchases.
When learning to implement fundamental analysis with a technical approach, one of the most important things is trying to find the path of least resistance. And while we’re all attuned to locating resistance on charts, this can have a fundamental implication, as well.
AUD/USD slipped to a fresh 2021 low (0.6993) after failing to push above the 50-Week Moving Average (0.7511) in October.
The S&P 500 has been trending strongly higher since the pandemic low, and on that it is difficult to bet against it even if at times it seems too high to buy. That doesn’t mean we get complacent, though, as an extended market can turn on a dime and do-so with seemingly little warning.
In the face of the US Dollar’s rise in 2021, the Chinese Yuan was a notable standout. The DXY Dollar Currency Index appreciated almost 7 percent in 2021. Meanwhile, the offshore Renminbi (CNH) gained just under 1% against the USD.
If you are pessimistic about the impact on the global economy of Covid-19 in general, and the possibility of new variants in particular, then going short GBP/JPY is a trade worth considering.
The coming year will see a raft of global central banks reversing their loose, pandemic monetary settings of the last two-years decisions and begin to normalize monetary policy by withdrawing emergency stimulus measures and hiking interest rates.
Carry trades haven’t exactly been at the forefront of the minds of investors across the FX space in Q4 amid a sizeable unwind in reflation trades. However, should we see risk sentiment stabilise in the new year, and GBP/JPY can once again look to rate differentials for direction.
The Federal Reserve made one thing abundantly clear at the end of its December meeting: the U.S. economy is moving toward tighter monetary policy amid upside inflation risks and improving labor market conditions.
While other central banks around the world have been withdrawing pandemic stimulus measures, both the Reserve Bank of Australia (RBA) and the Bank of Japan (BOJ) have maintained relatively loose policies.
Amid constrained supply chains and an already small mining base, lithium prices will likely continue to heat up through the first quarter of 2022, driven by increasing electric vehicle demand.
The South African Rand (ZAR) is one of the top performing EM currencies vs the dollar for 2021, but risks mount as central banks gear up to reign in stimulus and push hike rates.
Tammy Da Costa
The downward trajectory of Bitcoin currently remains intact as market participants continue to price in fundamentals.
The JPY has been the worst performing G10 currency this year. Driving the JPY weaker has been a reasonably benign environment for risk assets, higher US rates and more recently the energy shock.
Long UST 30YR, UST YC 2s10s Bull Flattener on monetary policy tightening, decelerating economic growth rates.Heading into next year, tighter monetary policy and a deceleration of economic growth are likely to present a more challenging environment for risk assets.
Despite trading near all-time highs, equity indices may be a source of volatility and two-sided action as changing interest rates, inflation, and COVID-variants are likely to continue dominating headlines in early 2022.
The woes for Boeing stock started about a year before the pandemic as the second 737 Max tragedy pulled the stock from all-time highs, above $437, down below $360. As the pandemic struck, shares fell over 74% hitting a low price of $89 in March of 2020.
We are in the midst of another COVID-19 variant, and the expected winter wave. This has resulted in a selloff in sectors that thrive on human participation, namely airline & casino stocks.
Digital assets have been one of the stories of 2021 but have been largely untradeable outside of spot trading due to size and lack of options availability. BTC the bitcoin futures trade at a 5 Bitcoin notional value, while /MBT the micro contract at 1/10th the size might be a bit too small, and neither have a liquid options market.
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