The forex market opens a world of opportunities for traders looking to make a profit. With a daily traded volume exceeding $5 trillion and major developments brewing in recent years, 2021 is set to be another wild year in forex!
Since the forex markets are largely impacted by news events, official announcements, bank decisions and societal data such as employment rates, every week is a new dawn for forex enthusiasts and experts. Traders were not short of market action throughout the past year, and major events such as the US election and Brexit vote, as well as the unprecedented breakout of the coronavirus pandemic, unleashed turmoil on most markets.
If you’re looking for a way to profit from forex trading in the year ahead, it’s worth paying attention to some of the most important currencies – many of which have been pushed towards tipping point by the past year’s events.
The US Dollar remains the most traded currency
We can’t talk about Forex without mentioning the US Dollar. As the leading major currency, USD makes up one half of all major FX pairs, such as EUR/USD and GBP/USD, and is involved in roughly 88 per cent of all trades taking place in the forex markets. Events taking place in the US, therefore, have the potential to impact markets across the globe, so it’s always worth keeping your eyes peeled for economic, political and social events emerging from the continent. With a new US President moving into the Whitehouse in the year ahead, we can expect to see several changes taking place as the nation closes a chapter under the Trump administration.
Indeed, the US presidential elections that took place on the 3rd of November 2020 brought with them weeks, months even, of uncertainty. The real test will come once the new president settles in. What does 2021 have in store for the US Dollar?
A rocky relationship for the Pound and the Euro
It’s been a long time coming, but the UK will officially no longer be a part of the European Union in 2021. The relationship between the Euro and the British Pound has been a subject of intense speculation over the past years of Brexit talk, especially after the striking of a long-awaiting deal right before Christmas. Not only will the divorce bill have a major impact on the EUR/USD, but with the UK and some European countries being among the worst-hit countries by the coronavirus pandemic, the future of these major economies is yet to be discovered.
Another currency that is highly dependent on the Euro is the Swiss Franc. Having a tight-knit relationship with the European Union, the majority of Swiss exports go to its neighbouring countries which also happen to be strong members of the EU. Any sign of weakness within the EU could indicate hard times ahead for the Franc.
Commodity Currencies: The Australian and Canadian Dollar
Exportation of natural resources has a major influence on the Australian Dollar and the Canadian Dollar, both of which are considered commodity currencies. The US is on the receiving end of three quarters of Canadian exports, while approximately 30 per cent of Australian exports go to China. Therefore, these currencies are highly dependent on the economic situation of their major clients. A financial crisis in the US would spell trouble for the Canadian Dollar, and the same goes for the Australian Dollar if China suffers economically.