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Forecast for 2019 — Forex, Interest Rates, Gold, Oil

January 1, 2019 by

With the trading days of 2018 over now and the trading sessions of 2019 have not started yet, it is time to check how my last year forecasts have fared and to publish my yearly Forex forecast for 2019.

EUR/USD

Fortune has failed EUR/USD in 2018, sending the currency pair well below the opening level and making it miss my forecast (1.2000–1.3000) by a very wide margin. Weaker economic growth in the eurozone compared to the United States, combined with further widening in interest rates, pushed euro down against the greenback. My forecast for 2019 is 0.9600–1.0800 and is based both on the current long-term downtrend and on the continued rate difference increase.

EUR/USD - Forecast for 2019

GBP/USD

GBP/USD returned to its post-Brexit bearish trend in 2018 whereas my forecast was for a price to stay slightly above its 2017 ending levels — in a 1.4000–1.5000 range. My view on this pair is similar to that of EUR/USD but with a more pronounced weakness as it looks like the Brexit will be executed according to its worst possible scenario — no deal. However, I also take into account the possibility of Brexit reversal, which would lead to a somewhat bullish tendency in pound. For the end of 2019, I forecast a range of 1.2000–1.4000.

GBP/USD - Forecast for 2019

USD/JPY

USD/JPY only managed to scratch the top of my forecast range for 2018 (100.00–105.00) and traded in a strong uptrend during the year. Based on reluctance of the Bank of Japan to switch their rhetoric to a hawkish mode, I expect the currency to continue demonstrating weakness in 2019. The range for my USD/JPY forecast is 102.00–109.00 at the end of the year.

USD/JPY - Forecast for 2019

AUD/USD

My first attempt to forecast AUD/USD year end range (0.8000–0.8500) failed poorly due to the same reason as my other forecasts for 2018 were wrong — strong US currency. For 2019, I expect AUD/USD to somewhat moderate its decline as there is a significant probability of the RBA to start hiking rates. My forecast for the year’s final range is 0.7000–0.7700.

AUD/USD - Forecast for 2019

USD/CAD

USD/CAD acted similarly to USD/JPY. Its 2018 forecast range (1.1750–1.2250) has been barely touched by the exchange rate. The yearly uptrend was based on the exceptionally strong US dollar and weak oil prices. For the end of 2019, I see USD/CAD between 1.2800–1.3900.

USD/CAD - Forecast for 2019

USD/CHF

My 2018 forecast range for USD/CHF (0.8500–0.9500) has been visited by the exchange rate only briefly. I expected a mostly weak USD during the year, so my forecast for USD/CHF was for a serious downtrend. In 2019, USD/CHF should contiue going up based on the interest rate difference and a much stronger economy in the USA. Yet, I do not think that the USD/CHF uptrend will be as strong as EUR/USD decline. It could end the year in a range of 0.9200–1.0400.

USD/CHF - Forecast for 2019

Gold

My 2018 gold forecast (1,300–1,400) was not such a bad bet compared to my FX predictions — the precious metal traded for about half a year inside that range. I think gold is ready to return to a long-term downtrend despite its current prolonged recovery. My estimate for the end of 2019 is between 1,123 and 1,263.

Gold - Forecast for 2019

Oil

My bullish forecast for 2018 (60.00–80.00) captured oil’s movement rather accurately until November. Then the price broke through the bottom of the range and went well below this lower boundary. There is little reason for oil to rise in 2019 — it might even revisit is 2015–2016 lows — so my end-year forecast for WTI blend is also bearish: 34.00–54.00.

Oil (WTI) - Forecast for 2019

Interest rates

The Federal Reserve has managed to raise the interest rates to 2.25%-2.50% in 2018 (instead of my 1.75%-2.00%) forecast — they have pulled four hikes whereas I expected just two. Two more hikes next year (up to 2.75%-3.00%) seem to be a believable prediction, which cuts down on hawkishness but at the same time would be enough to support my strong dollar forecasts.

The European Central Bank was not difficult to predict in 2018 — they did not change their interest rate and I do not expect them to do so in 2019.

The Bank of England hiked the rates only once instead of four times as I had predicted for 2018. This year, I think BoE will have to raise the rate to at least 1.25% due to potential hard Brexit consequences.

The Bank of Japan — as is the case with the ECB, there is no reason to expect any change to interest rates in Japan.

The Bank of Canada is ending 2018 with 1.75% policy interest rate (one standard size hike above my 1.50% forecast). This time, I believe BoC will lift the rate only once, because its economic growth is not too strong and its inflation is well below the bank’s upper boundary (3%). This means 2.00% interest rate by the end of 2019.

With the Reserve Bank of Australia my forecast of no change for 2018 turned out to be accurate. For 2019, I expect one hike from the RBA (to 1.75%).

The Reserve Bank of New Zealand failed to deliver the interest rate hike, which I had tried to predict, in 2018. For 2019, I expect it to actually cut the interest rate (to 1.50%).

The Swiss National Bank is another central bank that is not going to change its interest rates in near future. My 2018 forecast was also for no change, which was a true (albeit not difficult) guess at all.

If you want to share your own forecast on Forex or the related markets for 2019, please feel free to reply using the form below.

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