EROTF - December 2021: Forex Relative Valuation And Trading Opportunities

• The uncertainty over the economic outlook is now arguably the highest it has been since the start of the pandemic in early 2020.
• While economic growth has been strong, as economies have largely opened up, the supply-side has struggled to keep up with resurgent demand, with the consequence being inflation.
• Globally, the Israeli shekel, Chinese yuan, and Taiwanese dollar appear to be the most "overrated" (or overvalued currencies).
• When looking solely at the major currencies, we see that the Swiss franc and Canadian dollar stand out among the rest as the most "overvalued" currencies.
• At this point in time, the most contrarian trade among the major currencies is to sell the Canadian dollar and the Swiss franc and buy Japanese yen and Australian dollar.

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