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February 10, 2022

3 Pairs To Trade Now After CPI

Frank Cabibi

CPI m/m came in higher than expected once again for the USD as the annual inflation index hits a 40-year high at 7.5%. This is not a good sign for the currency as the value continues to drop worse than analysts and economists expected. With that said, here are 3 pairs to trade now that we see a weaker and weaker dollar.

3 Pairs To Trade

GBP/USD (Long Bias)

3 pairs to trade now
GU came up to test the top of the wedge again suggesting that a break above this level is likely. If price can close above this level, we could see a move higher towards the 200 DMA.

When comparing the two currencies, the pound has the USD beat in just about every category. And I think longing this pair is probably your best bet when trading against the USD. BOE has already raised rates and are forecasted to get up to 0.75% to cap inflation and eventually reach their 2% inflation target.

AUD/USD (Long Bias)

3 pairs to trade now
AU broke above the 50 DMA on the 1D chart and is nearing resistance around .72785.

I didn't think I would say this for some time, but Aussie/Dollar looks like a pair to long now. Australia's gold-heavy economy could really benefit from the sinking value of the USD that a 25 bp rate hike can't really fix. Regardless of the long term factors, it looks like we can at least expect this pair to come up to resistance around 0.72785 for a test.

USD/MXN (Short Bias)

3 pairs to trade now
The pair will likely test the 200 DMA again for support, but it also has bearish momentum. If the USDMXN can cross and close below the 200 DMA, we could likely see it move lower to the 20.13000s.

USDMXN is number 3 on the list of pairs to trade, and it is also the riskiest. If you are looking for a speculative play, this pair could end up being very lucrative. As bad as the Mexican peso is, it still has a leg up on the dollar right now. The combination of high inflation, low interest on the USD paired with the peso's high interest rate (5.5%) investors have been taking a risk-on sentiment towards the pair since 2020. Taking a short on this pair, if it moves in the right direction, will not only yield you profit on the trade but also on the hefty interest it pays you to short this pair.

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