Forex forecast 2022 — What are the trends in the foreign exchange market in 2022?
28 / May / 22 Visitors: 394
If we pick up a globe, we can see what is happening there at the economic, political, geopolitical and even social level.
Understanding our environment in which we live is very important for a global vision, especially in the economy.
We call it fundamental analysis.
It is also important to analyze graphs over time. Knowing how to analyze the trend of a currency pair is the absolute minimum before investing. Technical analysis is just as important in trading as a scalper, day trader, swing trader, and even a long-term investor.
Let's do Forex fundamental analysis together, as well as technical analysis of the currency market for 7 currency pairs.
EUR - EUR - EURUSD Forex Prediction
The euro is the second most important world currency after the US dollar and ahead of the yen, and accounts for approximately 20% of global reserves.
The euro is issued by the ECB.
Indeed, the index lost 3.5% over the year, rising from 106.76 to 102.99.
The impact on this currency is mainly related to monetary policy and announcements of meetings or speeches of the ECB, the publication of important economic information such as GDP, unemployment and job creation or the commercial balance.
According to OECD research, growth in the eurozone in 2021 will be +5.2%. This growth should continue with an expected increase of 4.3% in 2022 and 2.5% in 2023.
In France, after falling 8.1% in 2020, growth should rebound by more than 6.7% in 2021, which should be the best performance in the Eurozone, outperforming Germany, Italy or Spain.< /p>
We can therefore analyze that the growth slump in 2020 will be absorbed in 2022.
But the state budget deficit has increased dramatically during the health crisis, which is not yet over. France's deficit is larger than Germany's: 9.3% vs. 4.2% respectively in 2020. So the numbers for 2021 will be scrutinized to see if those numbers change.
Eurozone unemployment fell in 2021. Although figures have not yet been released, in September 2021, unemployment in the euro area fell by 1.919 million people, or 7.4%. This figure is far from full employment, but not higher than 11%, as in 2015.
This is undoubtedly the most important moment in 2022. Inflation in the Eurozone is very high, reaching 5% in December 2021.
The monetary policy of Christine Lagarde, President of the European Central Bank, is to maintain a very flexible policy. Should we rather write too kindly? That's the whole point.
Growth is positive, inflation has risen sharply, but monetary policy in the Eurozone does not change. Monetary policy is sound. Central bankers know that inflation is stronger than expected, more durable, but always temporary. Inflation is driven by high post-COVID consumption and partly by bottlenecks. You all mean ships waiting in the waters before they can unload their containers in port, or problems with the supply of semiconductors or furniture. According to some political and business leaders, these problems should be resolved by the end of the year, which will reduce inflation.
Energy is also a factor to consider when inflation rises. The price of Brent oil is high, but not too high. The law of supply and demand is again at the center of the debate. Supply is low due to the geopolitical situation (drone strikes on the United Arab Emirates (UAE), supply limited by OPEC+, pipeline maintenance and oil field disruptions, etc.) and demand remains high, especially in winter.
Therefore, it is important to follow the development of inflation this year.
The key rate increase should take place not in 2022, but in 2023. On the other hand, European taping should be completed in March 2022, it will be necessary to closely monitor the behavior of investors in financial markets.
Forex forecast EURUSD: technical analysis of euro and dollar
- EURUSD dynamics for 5 years: +8.09%
EURUSD price is between support at 1.1200 and resistance at 1.1650 with short-term bullish trend but long-term bearish trend.
There are therefore four possible scenarios:
1- The price is testing the 1.1650 resistance to form a long-term range.
2- The price is approaching a test of the resistance of 1.1650 and breaking through it. Then resistance 1.19 will be visible. Then the main trend will change and become bullish.
3- Price continues to fall and tests support at 1.12 to bounce again
4- The price is testing support 1.12 and breaks it. Then the price of 1.12 will become resistance and the price should move towards 1.08.
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Forex forecast: British Pound - Pound Sterling - Pound Sterling/US Dollar
The British pound is the fourth most traded currency in the world and is said to hold about 4.5% of the world's reserves.
The value of the pound sterling is also affected by the decisions of the Bank of England on monetary policy and various economic indicators such as GDP, unemployment, job creation and trade balance.
After Brexit, the pound sterling has appreciated against other currencies such as the dollar, euro or yen.
Growing sales in the UK
After falling 9.7% in 2020, the IMF predicts growth of 6.8% in 2021.
As in France, growth should be at pre-pandemic levels in the first half of 2022.
It will also be necessary to analyze the data on the state budget deficit as soon as they are published.
Territorially and geopolitically, it is important to keep an eye on exchanges between England and Scotland. Indeed, there has been tension between the two countries since Brexit, as well as disagreements over Covid-related restrictions.
Unemployment in the UK
In November 2021, unemployment in the United Kingdom was 4.1%, one of the lowest on the European continent.
In terms of inflation, the Bank of England (BoE) was the first major bank to raise its key rate from 0.1% to 0.25% in mid-December 2021.
Therefore, the Bank of England advocates a less accommodative policy and may raise rates further if high inflation becomes structural.
In December 2021, inflation was 5.4% throughout the year.
GPBUSD Forex Forecast: Technical Analysis
- 5-Year GBPUSD Dynamics: +9.85%
The price is testing the resistance zone at 1.3750.
Short-term trend is bearish and long-term trend is bearish after 1.3750 break.
Three scenarios are therefore possible
1- The price fails to break this resistance and the price will continue its short-term downtrend towards 1.32.
2 — The price starts to fall again and breaks through the support line at the level of 1.32, the line 1.2750 is in sight. Only if 1.2750 is broken, the long-term trend will become bearish.
3- The price has broken through the resistance line 1.3750 from above. It will then take a break of 1.3900 for the long-term trend to turn bullish again.
The US dollar is the most traded currency in the world. It is issued by the US Federal Reserve, the famous Fed.
The US dollar is the world's commercial currency and is used for commercial contracts or international investments. It is also the most important currency in foreign reserves, accounting for almost 63% of reserves.
For now, the United States is still the world's leading power, and its post-pandemic recovery shows it remains the world's powerhouse.
US GDP growth is expected to be 5.9% in 2021 after falling 3.5% in 2020. This means that, compared to the Eurozone and the UK, the United States has recreated the wealth lost during the Covid crisis.
For the euro area and the UK, it is important to check the government budget deficit for 2021. The Covid crisis has required an extremely significant budget bailout from the States. However, this deficit cannot be unlimited.
Unemployment in the US
And here again, the United States shows its superiority with an extremely low unemployment rate of 3.9% in December 2021. It's a full-time job across the Atlantic.
This is where inflation will undoubtedly be a key element in 2022 in the US.
In December 2021, inflation rose to 7% y-o-y, the highest level since 1982.
However, contrary to European monetary policy, the Fed (US Central Bank) has already indicated that it will raise key rates in 2022. Investors are thinking of 3 or 4 rate hikes, the first in March, faster than expected. . Therefore, we must closely follow the FOMC meetings and their decisions on monetary policy.
The challenge for Jerome Powell, chairman of the US Federal Reserve, is to keep the balance going. Having well-prepared investors for the cut, which is running smoothly for now and due to end in March 2022, it is now orchestrating a consistent rate hike without rushing the market and avoiding a crash. The risk really lies in a too rapid increase in the key rate and the withdrawal of investors from the stock market. In this regard, it should also be noted that the increase in rates slows down the economic development of the country. Companies will be able to borrow less money because the value of that money will be higher. As a result, less innovation, less development.
YEN - JPY - USDJPY Forex forecast
The yen is the third most traded currency in the world. It is issued by the Bank of Japan (BoJ).
Several factors can influence the exchange rate of the yen.
Japan is a country very open to foreign trade, so elements of the manufacturing sector play a complementary role in relation to traditional economic elements.
Even though Japan was in recession in Q4 2019, Japan has weathered Covid better than the Eurozone. Indeed, in Japan there was a decline of 4.8% (against 8.1%, for example, in France).
The IMF estimates that Japan's economic growth will be 3.3% in 2021 and 3.2% in 2022, again indicating a recovery in the wealth lost in 2020 in the first half of 2022.
Japan's debt, which has been over 200% of GDP for several years, is no longer a fear factor. Japan's rating is still high, according to three rating agencies: A1 Moody's, A+ S&P and A Fitch (for example, better than Spain).
Don't forget that Japan is the third largest economy in the world after the US and China with a GDP of $4.4 trillion in 2020).
Unemployment in Japan
This is Japan's advantage. The unemployment rate, one of the lowest in the world, at 2.8% as of November 2021, allows Japan to be in a situation of full employment. But the labor shortage is also a consequence of this full employment.
Inflation in Japan
Along with declining population and the size of the public debt, inflation is perhaps Japan's biggest problem. The inflation rate has been low for several decades. In November 2021, annual inflation was 1.5% and has not exceeded 1% since the 2000s.
USDJPY Forex forecast: technical analysis
- USDJPY dynamics for 5 years: -1.46%
Price is testing support at 113.50.
The short-term trend is bullish, as is the long-term one.
Three scenarios are possible:
1- The price bounced off the support at 113.50, forming a range of 113.50-115.00.
2 - The price bounced off the support and broke the resistance at 115.00. Be careful, if this scenario is confirmed, the short-term trend will turn bullish.
3 — The price breaks through the support at 113.50. Price will have 109.00 support in sight.
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Forex Yuan — CNH — USDCNH Forecast
The Renminbi, which means people's currency in Chinese but is also called the yuan, is the currency of the People's Republic of China and is issued by the People's Bank of China.
One of the characteristics of the yuan is that it is very little used outside of China.
Another feature of the yuan is that it is still controlled by the People's Bank of China, unlike the dollar or the euro.
Finally, the last feature is the use of a tool called turn rate. The central rate is set daily at 9:15 am by the People's Bank of China. The yuan can then rise 2% above or below this central rate thanks to the market.
China is the second world power after the United States.
China was one of the few countries to maintain +2.3% growth in 2020. In 2021, China's GDP grew by 8.1%, which is very resilient despite the controversial real estate crisis.
This growth even exceeded Beijing's forecast of 6%.
China has handled the Covid crisis differently than previous countries. In fact, he wanted to implement a "Zero Covid" strategy, even if it meant a slowdown in the economy.
While the Zero Covid policy is one of the toughest in the world, further weakening the service and supply chain sectors. The People's Bank of China (BPC) chose to cut its key rate to 3.70% to boost consumption and investment.
Unemployment in China
The unemployment rate in China is about 5%, which is a very good indicator, on the verge of full employment.
Inflation in China
The inflation rate in China is 1.5%, not 7% in the US. For this reason, the People's Bank of China may lower its key rates, which are high compared to Western countries.
USDCNH Forex Forecast: Technical Analysis
- USDCNH performance for 5 years: -8.68%
The price moves down and tests short-term support at 6.32. Please note that since May 2021 the price has been in the range of 6.32-6.48.
The trend is bearish. In 2021, the fall is still less steep than in 2020.
So we can define 3 scenarios:
1 — the price manages to rebound from the support at 6.32. After that, the price will remain in its range.
2 — The price remains in a downtrend and breaks through the short-term support at 6.32. Then support for 6.23 will be in the line of fire.
3 — The price comes back up and breaks the resistance at 6.48. In this case, a change in trend will be observed.
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Canadian dollar - CAD - USDCAD Forex forecast
The US dollar-Canadian dollar pair is highly correlated with fluctuations in commodity prices, including oil.
If we take a closer look at the country's export data, we can see that energy is the number one item in Canada. Thus, the price of oil is an important element of the economic health of the country, as well as the strength of the Canadian currency.
USDCAD Forex forecast: technical analysis
- USDCAD dynamics for 5 years: -5.96%
Price moves towards 1.2350.
The short-term trend is bearish, as is the long-term one.
Three scenarios are possible:
1 — The price moves to the support line at 1.2350 and bounces. Further, the rate will remain in the range of 1.2350-1.2800.
2 — The price breaks through the support line at 1.2350. After that, medium-term support 1.2050 will appear.
3- The price moves to 1.28 and breaks this resistance line. Therefore, we need to be even more careful to know if there will be a reversal of the main trend or not.
Australian dollar - AUD - Forex forecast AUD/USD
The Australian dollar is also a commodity-linked currency. Australia is one of the world's largest exporters of coal and iron ore.
Australia also remains dependent on demand from China and therefore on Chinese activity.
Increased demand for Australian goods will boost the Australian dollar.
AUDUSD Forex Forecast: Technical Analysis
- AUDUSD dynamics for 5 years: +0.83%
The trend is currently short-term bullish and we expect confirmation of a long-term trend change.
We can analyze 3 possible scenarios:
1- The price breaks the bullish channel from below. Then the price will remain in the range of 0.71-0.73. Then the long-term trend will still be bearish.
2- The price breaks the bullish channel from below and also breaks the support at 0.71. After that, the change in the long-term trend will be invalidated, and the short-term trend will become bearish.
3 – The price rebounds from the lower line of the ascending channel and breaks through the resistance at the level of 0.73. The price will then have to overcome the resistance at 0.7410 for the long-term trend change to be confirmed.
New Zealand dollar - NZD - Forex forecast NZDUSD
Once again, the New Zealand dollar will react more strongly to changes in commodity prices. It should be noted that key rates tend to be higher than elsewhere. Incoming streams are analyzed to take advantage of higher returns.
Forex forecast NZDUSD: technical analysis
- NZDUSD 5 year performance: -1.41%
The price is currently testing support at 0.67. In the event of a breakdown, the short-term trend will become short-term.
1- Price bounces off 0.67 support, confirming 0.67-0.69 range.
2- The price breaks the 0.67 support level, and the 0.65 level is in sight.
3- Price breaks resistance at 0.69 with 0.7050 in sight. If this scenario becomes a reality, then the curve will move out of the range of 0.67-0.69, which has been going on for several months.
Forex forecast CHF – CHF – USDCHF
When we talk about Switzerland, we often think of finances, low debt levels, and a safe-haven currency.
Thus, the CHF currency tends to rise when investors are scared and global economic uncertainty increases.
Let's not forget that the Eurozone is an extremely important partner for Switzerland. Thus, the CHF currency correlates with the strength of the euro.
USDCHF Forex Forecast: Technical Analysis
- USDCHF dynamics for 5 years: -10.46%
The price is currently in a wedge. This wedge is closing, volatility can come quickly. Growing investor fears could lead to a fall in the US dollar against the Swiss franc.
The price is currently in the 0.91-0.94 range since March 2021.
The short-term trend is bearish, as is the long-term one.
Four scenarios are possible:
1 — breakdown of the slope from below, which will correspond to the support line at 0.91. The price may bounce off this support and re-enter the slope.
2 — the price breaks the slope from below, as well as the support line at the level of 0.91. The price may then move towards its support line at 0.88.
3- The price comes out of the slope from above to stay in its range again and head towards the resistance line at 0.94.
4 - The price breaks the slope from above and the resistance line at 0.94. This resistance will then become support and the price will target the resistance at 0.98.
Whether you are a day trader, a scalper, a swing trader or a long-term investor, it is important to know what environment you are in.
These predictions are based on the author's own research and analysis. Before investing, it is important to do your own research and analysis.
Knowing the forex forecast for the current year, forex indicators, knowing the important technical points for your favorite currency pairs, learning forex and following the trend of the exchange rate should be important points in your trading.