Best Currency Pairs to Trade in 2022 [Forex Trading Ideas]

As we’ve entered 2022, it’d be great to have a watchlist of currency pairs that may do some action this year. Since the beginning of the pandemic, the markets have been particularly volatile, reflecting how the economies cope with the restrictions and aggressive dovish measures by central banks.

First, before we get to the specific pairs, let’s look at the prevailing themes that Forex will play out in 2022.

• Dollar strength: massive capital injections by the Fed have heated up the economy, with inflation rising to levels not seen in decades. The regulator stands to end the QE program and keep raising rates until 2024. Such a hawkishness gives us a strong bias to be bullish on USD.
• Weak euro: as ECB’s stance is still extremely dovish, the euro should continue falling. The geopolitical risks around Russia and Ukraine add to the uncertainties in the eurozone. 
• Surging energy prices: due to global lockdowns, the demand for energy collapsed during the peak of the Covid-19, leading to decreased output. As the economies start to reopen and consumption gets back to normal, manufacturers suddenly lack raw materials to raise production and meet the extreme demand. If energy and industrial metals take off, we can expect commodity currencies to perform well in 2022.

Each forex pair is impacted by some of the themes above in one way or another. We’ll briefly look at the fundamental reasons why the market should move in a certain direction and also utilize the chart to pinpoint the critical price levels. 

Most of the pairs below are suitable for traders of any timeframe. However, some exotics require extra care and might not be a good fit for day trading. 

Anyway, in the list, traders will surely find some instrument to keep an eye on during the year. Let’s get to it!

EURUSD: always actual

With monetary policies divergence between the Fed and ECB, the most popular forex pair is likely to show some weakness in 2022.

We’ve already been observing strength in USD in the short term, offering numerous trend-following opportunities for short-term traders.

Due to proximity, the EU is quite exposed to geopolitical uncertainties related to Ukraine and Russia, so any related headlines may cause volatility, especially intraday. 

EURUSD, as the most liquid pair, should be on the radar of any FX trader.

The monthly chart above shows the market is approaching a long-term trendline. Traders can expect the price to stall at around 1.10. If the monthly candle closes confidently below the trendline, the odds are that the downtrend accelerates. 

Also, notice how low the recent volatility is compared to the previous decades (see the indicator window). We might be at the beginning of the new volatility cycle, so watch out.

USDJPY: epic uptrend

Arguably, the yen’s weakness is one of the most significant factors driving the value of USD. BOJ is staying dovish as the regulator desperately tries to meet the inflation target. 

Meanwhile, the USDJPY continues playing out the global breakout from the over five years-long symmetrical triangle (see the image below).

From the technical perspective, the market has a long way to go upwards, considering a pattern target (see the blue arrows) that matches the 2002’s high. If the dollar remains strong, the 124.00 target is possible this year. If the market goes into a deeper correction, the Fibonacci retracements 0.382 and 0.5 would be reasonable to expect the recovery from. 

USDJPY is the second most traded pair in the world. So, scalpers and day traders can take full advantage of the volatility, enjoying tight spreads.

USDCHF: what’s safer?

Here is the final major pair for 2022. The instrument is pretty correlated with the EURUSD, then why is it in this list? If we look at what happened in March 2020 (see the circled area below), when the Covid-19 outbreak started, USD took a hit, with the public putting more trust in a “safer” save-heaven, CHF. If the new Covid variant suddenly emerges, Swissy is likely to grow.

Of course, in that case, the CHF crosses would be the most volatile. However, USDCHF is the most liquid CHF pair, and the more traded capital is involved, the more reliable the price action is, making it easier to find high probability setups.  

Finally, the illustration above gives us a critical level of 0.91 that the market may interact with. Also, throughout 2021, the pair has formed a symmetrical triangle, the breakout from which may heighten the volatility.  

CNH: China doesn’t like strong yuan

Chinese central bank has been putting up with the yuan’s strength since the beginning of the pandemic. The regulator is always interested in supporting Chinese export, which comes under pressure when the local currency appreciates. 

PBOC took a path of easing, cutting interest rates for the first time in two years, and conducting other policies focused on “avoiding collapse in credit growth,” as Deputy Governor said.

The chart below shows the market approaching long-term support of around 6.3. 

Will we witness some sort of short-squeeze from there? Traders should be ready for action around the current prices. A conservative upside target is around 6.5, as the market tested this level several times during 2021 and in the last five years.

Although USDCNH is an exotic pair, it’s pretty liquid, with moderately erratic price action. Short-term players, especially swing traders, should keep an eye on the pair in 2022.

Remember the likely upcoming strength in commodities? You can bet on that by trading AUDCNH. AUD should strengthen if raw materials are in demand, spurring even stronger bullish sentiment against the yuan. Look at the chart below, and it definitely looks stronger than the yuan versus the greenback.

The market isn’t in a steep long-term decline; rather, the pair has been ranging on a bigger scale. The 4.5 support may serve as a starting point of a reversal to the upside. 

China and Australia have a strong trade relationship, making AUDCNH liquid and having readable price action.