Many retail traders are likely aware of how US Dollar strength has surged to decades-long highs over this past year. This is primarily due to the Federal Reserve’s hawkishness in response to staggering increases in the cost of living, as well as USD safe haven status as the world teeters on the brink of a global recession. While major pairs such as GBP/USD and EUR/USD are particularly popular for those aiming to go long on USD, there are other promising, less frequently traded pairs that are worth watching as well. Here are three such USD pairs to consider, all of which are viewed favorably by the EdgeFinder, A1 Trading’s market scanner software. These 3 surprising pairs to buy are listed in order of favorability, i.e., their respective EdgeFinder ratings and biases, along with some additional technical and fundamental analysis.
1) USD/CAD (Earns a 5, or ‘Buy Rating)
This pair is a bit unique in terms of fundamentals, because a portion of Canada's economic performance is predicated on exporting energy to the US, a primary trading partner, knitting their economies together. Regardless, the US economy has remained far hotter than Canada's, which reflects accordingly in the COT data above, as institutional traders clearly favor USD over CAD. Price action is retesting the lower depicted zone as support following a stunning breakout to the upside of trendline resistance in September.
2) USD/TRY (Earns a 5, or ‘Buy’ Rating)
This pair is an unusual case that might spook newer traders; after all, wouldn't fundamentals favor the currency with the higher interest rate, and high inflation to match? However, that has not been the case here as Turkey grapples with horrific stagflation, much of it due to the Lira's near collapse in value. Turkey's interest rates have not been allowed to rise accordingly in order to mitigate hyperinflation, sending this pair to historic highs. It appears a breakout to the upside of resistance may be occurring.
3) USD/ZAR (Earns a 4, or ‘Buy’ Rating)
South Africa's economy is one of Africa's strongest, having grown rapidly over the past few decades post-Apartheid. However, many structural problems remain, including an unemployment rate exceeding 30%. Similar to USD/TRY's fundamentals in a sense, this is another case where interest rate divergence is not as compelling for forex traders, since South Africa's economy is not overheating in a comparable way to the US. It appears that recent price action may have found a key support zone prior to trendline support.