The analysis made in the article is based on some driving factors that affect currency movement in the forecast of the forex market in 2023.
Forecast for 2023 in the Forex Market
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Economic indicators and charting tools help determine the price action of a currency pair. The forecast is made accordingly in major currency pairs for 2023.
As we head into 2023, energy shortage and supply chain crisis are the challenges facing global economies. If the Ukraine war ends, supply-chain restrictions will come down and end the energy crisis. Until then, chances of a global recession are increasingly possible.
Fear about another Covid strain has come down as they are less virulent and do not cause much disturbance.
Driving Factors of the Forex Market in 2022
In 2022, the Russia-Ukraine war led to high inflation in global countries. It caused supply chain disruptions that hampered the production and manufacturing sectors. Just when several countries started recovering from the Covid-19 restrictions and limped back to normal, the Ukraine war, which started in February 2022, brought further disruptions. It was a big setback for a global recovery.
Inflation rose to double digits in major countries like the US, the UK, and the Euro. The Fed pushed rates higher to combat inflation pressure, while the BoE and the ECB were slower to raise rates. Analysts warn about a global economic recession if rates remain high. They expect the Fed to take a softer stand on its monetary policy in 2023,
The Dollar selloff helped the Euro and British Pound to recover from life-lows.
Dollar Forecast for 2023
The single most popular currency is the US Dollar. It is the leading reserve currency in the world and is considered a safe-haven currency. The Fed took a hawkish approach to handling high inflation in the US economy. The Dollar touched life-highs at 115.00 levels in September 2022.
For 2023, the US Dollar has support at the 101.75 level. If the DXY slips below this support, it will bring the Dollar index to the 98.90 level.
On the upside, the US Dollar has resistance at the 105.50 level. If the DXY crosses this level, it may see a sharp rise to 110 levels.
The Dollar Index will consolidate between the 102 to 105 levels before it takes direction in 2023.
Forecast of British Pound to Dollar Index for 2023
The British Pound slid to life-lows in 2022, close to parity, at 1.03 levels. But at the start of 2023, the Pound is back at the 1.20 level.
If the GBP/USD crosses the 1.21 level, it may see a positive upmove toward the 1.2570 level.
If the British Pound to Dollar currency pair falls lower, it may slide to 1.1625 or even further down to 1.1450 levels.
Forecast of Euro to Dollar Index for 2023
The Euro to Dollar Index begins the year at the 1.06 level. It slipped below parity to 0.9535 levels in November 2022. The ECB hiked rates rapidly towards the end of 2022.
If the EUR/USD pair crosses resistance at 1.0750 levels, it will continue its uptrend to 1.0900 levels.
A fall below support at the 1.0500 level will take it lower to 1.000 levels, at parity with the Dollar.
Inflation and interest rates in the Eurozone will determine the direction of the EUR/USD movement in the forex market. After Russia stopped its energy supply to Europe, the zone suffered a severe energy crisis, and fuel prices skyrocketed, as the Eurozone received almost 40% of its energy supply from Russia.
Forecast of AUD/USD Index for 2023
The AUD/USD currency pair was under pressure in 2022. As long as the Aussie to Dollar index remains above the 0.6850 level, Australian Dollar to US Dollar currency pair will continue its uptrend. Growth in travel and tourism sector in Australia and Asia will be positive for the currency.
0.6890 is the first resistance to watch out for, which will help the Australian Dollar to break out higher to 0.7000 levels and the next resistance at 0.7125 levels.
The Australian Dollar has support at the 0.6810 levels and the 0.6500 levels.
Forecast of NZD/USD for 2023
The New Zealand Dollar to US Dollar slipped to two-year lows in 2022. The NZD/USD currency pair begins the year 2023 at 0.6250 levels,
The level at 0.6325 is psychological support that may bring recovery into the NZD/USD currency pair.
On the upside, the levels at 0.6500 and 0.6750 will provide resistance in 2023.
Forecast of USD/JPY for 2023
The USD/JPY is at a 4-decade high in the forex currency market. The Dollar to Yen currency pair reached a high at 152.00 levels in November 2022.
However, the Japanese Yen may strengthen again in 2023. The psychological resistance at 136.50 will be the level to watch for on the upside.
On the downside, the USD/JPY may move lower to 126.75 levels. The Japanese Yen may also strengthen to 115 levels.
Financial conditions across the globe eased after central governments introduced tightening measures. The Fed signals a slowing pace in monetary policy rate increase with a moderation of inflation expected in the coming year.
We will continue to keep track of the performance of the forex market in 2023
