On January 14, 2013, CNBC predicted that this year would witness a currency war between nations, with more and more countries resorting to devaluing their currency in a bid to boost their economy. Most of us involved in the Forex market use some form of Forex software to making trading decisions. Yet, an informed decision can only be made when we have some grounding in what lies in store for the market. This article, therefore, attempts to bring together the various currency predictions that expert economists are making regarding 2013.
Currency Trends to Look Out For before Using Forex Software
Several Forex experts have predicted that 2013 would be an eventful period for the major currencies. Some forecast that while the USD, GBP and JPY could weaken, commodity currencies are likely to strengthen towards the latter half of the year. The monetary policies of the ECB and the Federal Reserve also suggest that there could be a EUR/USD upside. The current predictions suggest a more positive outlook on US growth as compared to the Euro zone. Let’s take a look at what lies in store for the major currencies:
- The US dollar (USD) – The USD is likely to be affected by movements in the labor and housing markets, the Fed’s monetary policy and the outcome of the “fiscal cliff”. The foreign exchange market expects to see an improvement in the labor and housing segments. On the other hand, the Fed might need to review its monetary policy once the effects of the “fiscal cliff” become evident. Watch out for developments related to spending cuts and the debt ceiling.
- The Euro (EUR) – While positive sentiment is still associated with this unified currency, unless there are some indications of economic growth in the region, the positivity might not last for long. Investors should also keep an eye out for a potential bailout initiative if Spain fails to sell €20 billion to Bonos. An international bailout could unsettle the precarious balance in the Euro zone, seen towards the end of 2012.
- The British Pound Sterling (GBP) – While the UK economy continues to struggle with a sluggish economy, its central bank has yet to consider a quantitative easing initiative. However, some rumors about a possibility of a QE program in early 2013 have recently been doing the rounds. If the Bank of England does implement such a scheme, the foreign exchange market is likely to see a sell-out of the GBP.
- The Japanese Yen (JPY) – There are speculations that the JPY would weaken against the USD in 2013, falling at least by about 10%. The Shinzo Abe government and the new governor of the BoJ (to be announced in April 2013) are expected to succeed in devaluing the JPY. However, if the Euro zone environment worsens, both the USD and the JPY might prove to be safe haven trades.
- The Swiss Franc (CHF) – One of the major factors that will influence the CHF is whether the Swiss National Bank removes its peg on the EUR/CHF of 1.20000. The Swiss will need to review its peg either if the CHF is restored to a safe haven status or if the EUR/CHF pair begins to rise.
Predictions for Winning Trades in 2013
Here’s our take on Forex trades for the year:
- USD/CAD – Even the least conservative estimate pegs the CAD at 0.9600 to the US dollar, with only a handful of analysts predicting parity in 2013. Any price above parity would be a good opportunity to sell USD and buy CAD.
- GBP/USD – Analysts are currently divided about the direction the GBP might take in 2013 against the USD. If the BoE implements a QE program, the GBP would strengthen, although the upside is likely to stay under 1.64.
- EUR/CAD – With the CAD expected to strengthen in 2013, many analysts recommend selling EUR and buying CAD this year.