As the US-Iran conflict reshapes the global oil market, investors are doubling down on bets that energy-related currencies will continue to rise. Deutsche Bank, JPMorgan Chase and Vanguard have urged clients to take part in such trades.
Strategists at JPMorgan Chase and Deutsche Bank recommend the Norwegian krone and the Australian dollar. On Monday, the price of Brent crude futures broke through $108 a barrel as efforts to restart peace talks stalled, boosting the Australian dollar. The appeal of these two currencies is growing as energy sales revenue boosts their economies and allows for tighter monetary policy – markets expect both countries to raise interest rates this year.
Since the conflict broke out, the krona and the Australian dollar have risen by approximately 2.5% and 1% respectively, making them the best-performing currencies among the Group of Ten. JPMorgan is also bullish on going long the krona against the Swiss franc and the Japanese yen.
At Pioneer, strategist Upadhyaya said that the focus is on higher-yielding currencies in energy-rich economies, including Kazakhstan, Brazil and Nigeria, while the euro and the US dollar are being bet on a basket of currencies.
“We hope to site it in a high-yield area that is energy self-sufficient,” Upadhyaya said.
These suggestions show how traders can adjust to the broader changes in the currency market: as oil prices soar and supply risks rise, investors favor export-oriented countries that benefit from improved terms of trade, while avoiding importers that face the risk of rising energy costs.
“The most attractive investment opportunities lie in commodity-linked currencies,” said Federico Cesari, of AXA Investment Managers. He believes the Australian dollar, Canadian dollar, Norwegian krone and Swedish krona are “severely undervalued”.
Upadhyaya said he was cautious about the currencies of Asian energy importers, which are under pressure due to the ongoing tensions around the Strait of Hormuz and the rising oil prices.
Technical analysis:
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Gold: The price has failed to hold above the key level of 4700/4720 for two consecutive days. Trump has not expressed approval of Iran’s latest “three-step” plan. Therefore, there are still some uncertainties in the market. Today, we will pay attention to whether the price will sweep the liquidity near 4630. After the price stabilizes, we will consider catching the rebound signal. For detailed positions, please consult the plugin.
(Gold 15-minute chart)
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Nasdaq: After the price dropped into the yellow zone as alerted by our plugin yesterday, there was a clear rebound. However, the price has not yet resumed the momentum to reach new highs. Today, we will focus on observing the liquidity near the 27,000 level for further sweeps before considering capturing a rebound signal. For detailed positions, please consult the plugin.
(NASDAQ 15-minute chart)
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Crude oil: The intraday price direction is not clear. Whether the US and Iran can eventually reach an agreement remains to be seen. We suggest waiting and observing the crude oil market for one day until the fundamentals become clearer. For detailed positions, please consult the plugin.
(Crude Oil 15-Minute Chart)
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Today’s key financial data and events to focus on:
22:00 US Conference Board Consumer Confidence Index for April
