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Forecast for 2013 — Forex, Gold, Oil, Interest Rates

December 31, 2012 (Last updated on May 6, 2013)

It is time for my traditional Forex forecast for the new year. Also, it is time to look back at my 2012 forecast and note the differences between my fantasies and the reality we lived in last year. The quoted blocks of text below are the last year forecasts for individual trading instruments and indicators. Below each of them, I explain the actual outcome:

EUR/USD — I believe that it will fall to about 1.25 in 2012 due the lack of fast and effective solution for the eurozone debt crisis. If the situation worsens there, the pair might even break down below that level. In case the fiscal problems will get solved (highly unlikely), I expect EUR/USD to end the year between 1.35 and 1.40.

Even though my forecast was rather vague, it is hard to tell whether it turned out to be true or false. The pair has fell to about 1.2 as of mid-year and then rallied up to about 1.31 by the end of the year. But we can definitely say that the European fiscal problems have not been solved at all.

GBP/USD screams for a strong bearish wave — both from the technical analysis and from the macroeconomics points of view. The problems of the eurozone will also be negatively affecting the pound next year. The pair can go below 1.40 and end the next year there.

Wrong. GBP/USD showed a rather good year, trading above the opening level for longer periods than EUR/USD.

USD/JPY will finally enter a bullish albeit very weak trend. The pair has little place to go down without turning Japanese exports into a joke. In my opinion, this pair has a strong chance of ending the year 2012 above 80.00.

Somewhat correct. During October-December, USD/JPY rallied much faster than I would have expected.

USD/CHF will remain under influence of the EUR/CHF floor set and maintained by SNB at 1.2, which I expect to persist through 2012. The second strong factor will the euro’s performance. With stronger euro, USD/CHF may stagnate near the current levels. In case of a further euro decline, USD/CHF may surge to as high as parity.

CHF remained much linked to EUR, so there is little point in comparing this forecast to the actual outcome as USD/CHF trading curve resembles the inverted version of EUR/USD chart.

Oil is in a long-term downtrend, but has a strong support level near $100/barrel. I believe that the price for this commodity will depend mainly on the geopolitical factors in 2012. War conflicts and political instability in the oil-producing regions will drive the price up. If the next year is going to be calmer than this one, oil may reach $100 and, if that level is broken, it may go down to about $90/barrel.

Although there were international tensions that should have led to higher speculative demand for oil, the commodity failed to rally above $100 level and even traded well below $90 during some parts of 2012.

Gold is currently trading near a very important support zone. If it breaks down, there’s a plenty of space for a bearish action for this precious metal, with $1,000/ounce looking like a probable year end target. If gold manages to bounce off, it may test $2,000 psychological resistance during 2012 and probably go even beyond that level.

Wrong. Gold neither rallied nor fell significantly in 2012. Its price action is best described with the word “uncertainty”.

As for the interest rates, I choose to expect no changes both from the Federal Reserve and the Bank of Japan in 2012. The European Central Bank will be tempted to cut its main rate next year. I expect it to go down from the current 1% to 0.5% or even 0.25%. The Bank of England will probably have to do the opposite — hike the interest rate to curb the inflation. The bank rate may go up from the current 0.5% to about 1% in 2012.

Somewhat correct. Although I was right about Fed and BoJ not moving their rates, I was wrong about both ECB (who only lowered from 1% to 0.75%) and BoE (who did not move its interest rate). Additionally, both Fed and BoJ have eased their monetary policy by expanding asset purchase programs instead of using their target rates.

Now, to my Forex forecast for the year 2013. Two notes first. This year, I have decided to add a forecast for EUR/CHF and remove one for USD/CHF pair because all CHF movement is much dependent on EUR/CHF level kept by the Swiss central bank. Second, do not put much trust into these forecasts — they are just random musings of a semi-successful Forex trader and thus should not be treated with a lot of seriousness.

EUR/USD is forming a misshapen inverted head-and-shoulders pattern on its weekly chart, so I would expect it to continue rising at least for some time (or at least to 1.42) in 2013. Fundamentally, the only reason for such growth would be either some really smart solution for the financial troubles of the eurozone or a really bad situation in the United States.

GBP/USD looks to be ready to break up through a line of resistance on its W1 chart. That would be in line with the EUR/USD moving up after its inverted H&S pattern. The same fundamental triggers could play out here. Bullish targets are located at around 1.67 for GBP/USD in that case.

Some might believe that USD/JPY has entered a sort of a long-long-term rally with its current seemingly non-stop ascent. Unfortunately, the Bank of Japan may cut that rally anytime by refusing to provide further yen-weakening measures, while there are strong resistance levels ahead of the currency pair. USD/JPY may stop near 100.00 level or even fall back to about 75.00.

I expect the Swiss National Bank to refrain from removing EUR/CHF floor in 2013. They will either keep it at 1.2 or move slightly higher (for example, to 1.25) but the latter is much less probable. In case EUR/USD will be moving up because of some improvements in eurozone economy rather than weakness in the US one, EUR/CHF may enter a bullish trend even without SNB intervention.

Oil is forming a sort of symmetrical triangles pattern on the weekly timeframe. There is no telling where it will go when the pattern bursts, but as this consolidation follows a minor uptrend, the chances are that crude will rally in 2013. $120-$130 per barrel look quite probable to me.

Gold is consolidating since mid-2011. It fails to post higher highs but has no problem with higher lows. I would say it should be trading below its all-time high, awaiting a good situation to enter a new rally. It is hard for me to imagine conditions that would trigger mass-sale of this precious metal.

Interest rates will be completely uninteresting next year. The US Federal Reserve, the Bank of Japan along with the Swiss National Bank will have no reason to alter their rates. At the same time, European Central Bank will be tempted to cut the rate, while such step will probably remain impossible due to elevated inflation rates in the eurozone countries. Bank of England may turn out to be the only major institution raising rates next year.

Happy New Year! I wish your trading results to be completely independent of the unexpected events of 2013!

If you want to share your opinion on this year 2013 forecast for the major Forex related markets, please feel free to reply using the form below.

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