Learn more about these picks and why they could be the biggest plays of the New Year. Here’s our top 3 markets in forex right now.
The US is in a constant search for more productivity and supply in the oil market, and they are struggling to find it. As the largest producer and consumer of this commodity, the government and curators are looking for supply elsewhere. In an article by IBD, they mention that Biden and Tehran are in discussions with the potential to increase the amount of barrel supply by 1.4 million.
Another news source show us that pre-pandemic productivity has still not been reached in the US. However, we are expected to increase production by 670,000 bpd in 2022. The problem facing the US is that demand is outweighing supply, and that is causing a rather large move in the oil sector. However, under the Biden administration, oil production was cut setting the stage for higher prices. And if the administration decides against a proposed production increase, analysts fear a $100 price per barrel.
Having this information will help us look at pairs that rely heavily on oil production and demand.
Lower production as of now is putting a weaker and uncertain valuation around the dollar. However, investors expect at least one rate hike in 2022 which they could then price into the dollar’s price. Additionally, if the US can manage to boost the amount of barrels manufactured without depending on foreign sources, the USD will get stronger. The dollar index has had a great year so far after reaching as high as 8%
Tensions between Russia and Ukraine have not been pleasant for a while either, and this can have a negative impact on NATO and geopolitical agreements.
Outlook on the loonie looks stronger than the USD right now after the latest take on oil’s global supply and production. Canada relies on oil demand more than the United States so a less productive US could help out Canada’s currency. So, Canada needs the opposite thing to happen that the USD bulls are hoping for: less production in the US and finding supply elsewhere like Tehran and/or Canada.
All three forex picks have something in common: oil production. Whether or not the US decides to up their supply will undoubtedly affect all three markets. But this also doesn’t necessarily mean that one will be better than the other in the New Year. In fact, all three seem like strong picks going into 2022. Biden will likely not try to boost production, and if he does, it will probably not be by a substantial amount.
So, I think it’s important to consider a market where oil demand grows, Canada’s loonie gets stronger from a higher oil price per barrel, and investors begin to price in the USD after the federal fund rate hikes in 2022. All three have the potential to be very bullish especially if treasury yields continue to increase and omicron fears push through into 2022.
To read our other top picks, check out our market analysis tab on the A1 website here.