MTI’s Grand Giveback Event
Your favorite traders are giving back to you this holiday season. They’re spilling the tricks of their trade in a free exclusive live event on December 15th. You will be knowing about the top tips they used to grow their own trading accounts.
So, if you’re serious about taking your Forex game from good to great – SAVE YOUR FREE SPOT HERE
The U.S. dollar has been on every trader’s radar in 2023, steadily gaining value, making moves, and impacting currencies tied to the USD.
The movements have been a bonanza for many Forex traders, presenting numerous trading opportunities amid heightened volatility.
In times like these, revisiting the fundamentals and adopting a robust trading strategy is crucial for capitalizing on potential winning setups.
Let’s delve into why and how the US dollar is making waves and explore some of the best currencies to pair with the USD for strategic trades.
Here we go…
What Drives the USD Moves?
Understanding how the U.S. dollar is influenced by various factors is the key here.
Let’s break down a situation that helps explain why the dollar saw a significant boost when the Fed consistently kept raising interest rates.
To better understand this, picture yourself as someone with wealth to manage, especially in the years 2022 and 2023, when the global environment was uncertain and marked by increased volatility.
With U.S. interest rates on the rise, U.S. government bonds became a more enticing option for you and many other investors, because they offered better interest rates and better returns.
This made U.S. bonds a preferred choice for investors looking to grow their wealth.
Investors rushed to invest in these bonds because they provided superior returns compared to countries struggling with economic slowdowns and where the pace of rate increases was slower than the U.S.
This major influx made the dollar stronger as compared to other currencies.
Consider the 2-year U.S. government bond, yielding around 0.7% in January 2022. Today, this yield had surged to approximately 4.7%.
Such a substantial increase prompted investors to redirect their funds toward the U.S. As money flowed into the U.S., the demand for the dollar skyrocketed, leading to an increase in its value.
In simple terms, the upward or downward movement of the dollar is closely connected to the strategic actions taken by the Federal Reserve. And there could be many such reasons which can create a ripple effect for the dollar’s value in the Forex market.
Let’s now go over a few currency pairs that can pair well against the USD for trading.
Best USD pairs
High inflation and economic slowdown in 2023 caused global slowdown, supply chain bottlenecks, and risk aversion among many investors.
All of this favors the USD.
This is because the dollar has been known as a safe haven currency and it’s seen as a safe investment during times of economic and political turmoil.
Apart from the USD, the CHF and the JPY are also widely considered as safe havens.
On the other hand, the worst performing currencies in such an environment are generally the commodity-linked currencies. These are the AUD, the NZD, and the CAD. This is because the global slowdown weighs on commodity prices which is bad news for the countries that export them.
Here are 3 currency pairs that we consider best to trade against the USD and what tends to move them.
EURUSD
The Euro and the US dollar represent two major economies globally, and as such, this is the most-often traded currency pair.
Movements in the exchange rate for this pair are linked to central bank interest rate decisions of these countries and also the non-farm payroll (NFP) announcements.
The pair is also preferred by many traders because it is highly liquid, comes with low spreads, and because one can place large volumes of trade with it.
USDJPY
The dollar is the most traded currency globally, while the Japanese Yen is the most traded currency in the Asian market.
Any central bank developments in these nations can spur volatility in this currency pair, which can help one trade the volatility to target potential profits.
This currency pair is also preferred by many as it has one of the tightest spreads in the Forex market which reduces the overall cost of the trade.
GBPUSD
The GBPUSD pair is favored by day traders, who aim to take advantage of price fluctuations by trading in and out of the market at a quick pace. For this reason, it is also considered one of the best forex pairs for swing trading.
The above pairs are also called “Majors” as these are generally the most popular type of currency pairs to trade in the Forex.
The majors always have the U.S. dollar as one of the currencies and are generally the most liquid pairs, i.e. they provide the trader with the greatest ability to trade that pair on the forex market.
Trading Strategies
As we saw, the USD has been at the gaining end in 2023.
So, with a strengthening dollar, one of the trade strategies can be to look out for currency pairs that benefit from a rising USD to potentially target gains.
These would generally be the pairs where the other currency against the USD is a commodity-based currency or one that is depreciating in the current market.
Another way to trade major movements in USD pairs is to keep track of key economic announcements which might affect the value of the dollar.
These can be central bank monetary policy decisions, inflation data, or non-farm payroll and unemployment claims data. It’s because these events affect the Fed’s stance on interest rate hikes which can further have an effect on the dollar. You can track these events from a Forex calendar and strategize your trades accordingly.
Generally speaking, the best pair for you to trade is the one that you are most knowledgeable about and one that meets your trading and risk-reward expectations.
Our top analysts have been reading many USD setups in the current market shifts.
Their chart is showing an exciting pattern! Know about it in our upcoming webinar by clicking here.
If you wish to get Forex trade setups and learn market strategies, check out the Equities on Demand trading room.
It’s where our pro analysts – Tyson Clayton and Chris Pulver – will take you through real market conditions and guide you on your journey to becoming a consistent trader across the board. Try it today.
Predictions are not a guarantee of this or any result. Information provided on this prediction is for general information purposes only. We offer no representation or warranty with regard to this prediction. No prediction is personalized or otherwise directed at any individual or particular circumstances. We disclaim and will not accept any liability for losses associated with this prediction. All trading carries substantial risk.
Some of the information presented may be provided by a third party. MTI is not responsible for any claims, products, services, or information provided by any third parties. MTI does not provide any warranty or representation as to any third party data. MTI expressly disclaims any responsibility and accepts no liability with respect to such third party information, services, and/or products. The third party data is provided for convenience only and is in no way meant to imply an endorsement by MTI or any other relationship.
Please see our full risk disclaimer.
