On January 14, 2013, CNBC predicted that this year would see a currency war between nations, with more and more countries resorting to devaluing their currency in an attempt to boost their economy. Most of us involved in the Forex market use some form of Forex software to make trading decisions. However, an informed decision can only be made when we have some basis for what is in store for the market. This article, therefore, tries to gather the different monetary predictions that expert economists are making regarding 2013.
Currency Trends to Consider Before Using Forex Software
Several Forex experts have predicted that 2013 will be an eventful period for major currencies. Some forecast that while the USD, GBP and JPY could weaken, the commodity currencies are likely to strengthen towards the second half of the year. The monetary policies of the ECB and the Federal Reserve also suggest that there could be a rise in EUR/USD. Current predictions suggest a more positive outlook for US growth compared to the Eurozone. Let’s take a look at what’s in store for the major coins:
- The US Dollar (USD) – The USD is likely to be affected by movements in the labor and housing markets, the Federal Reserve’s monetary policy, and the “fiscal cliff” outcome. The exchange market expects to see an improvement in the labor and housing segments. On the other hand, the Fed may need to revise its monetary policy once the effects of the “fiscal cliff” become apparent. Watch 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 signs of economic growth in the region, the positivity might not last long. Investors should also be on the lookout for a possible bailout initiative if Spain fails to sell 20 billion euros of Bonds. An international bailout could destabilize the precarious balance of the Eurozone, seen towards the end of 2012.
- British Pound Sterling (GBP) – As the UK economy continues to battle a sluggish economy, its central bank has yet to consider a quantitative easing initiative. However, some rumors have been circulating recently about the possibility of a QE program in early 2013. If the Bank of England implements such a scheme, it is likely that the currency market will see a complete liquidation of the GBP.
- The Japanese Yen (JPY) – There is speculation that the JPY will weaken against the USD in 2013, falling by at least 10%. The Shinzo Abe government and the new BoJ governor (to be announced in April 2013) are expected to succeed in devaluing the JPY. However, if the Eurozone environment worsens, both the USD and JPY could become safe havens.
- Swiss Franc (CHF): One of the main factors that will influence the CHF is if the Swiss National Bank removes its EUR/CHF peg of 1.20000. The Swiss will need to review their peg if the CHF is restored to safe-haven status or if the EUR/CHF pair starts to rise.
Predictions for winning trades in 2013
Here is our take on Forex trading for the year:
- USD/CAD – Even the least conservative estimate pegs the CAD at 0.9600 per 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 on the direction sterling might take in 2013 against the US dollar. If the BoE implements a QE program, the GBP would strengthen, although the rise is likely to remain below 1.64.
- EUR/CAD – As the CAD is expected to strengthen in 2013, many analysts recommend selling EUR and buying CAD this year.
