Monthly Forex Forecasts by Traders Union analysts

Long-term investors are preoccupied with interest rates, trying to predict upcoming moves by the world's leading central banks regarding interest rates. After almost certainty that the US Federal Reserve will lower interest rates in June, investors are already expecting this in September at best.

Along with the above, the USD was again in demand, and most of its competitors closed the past week with a fall. The JPY further suffers from the interest rate differential and the Bank of Japan's reluctance to begin tightening monetary policy more actively, falling against the USD to fresh multi-year lows.

Its prospects remain extremely negative, and the USD breaking through strong resistance paired with it can accelerate its fall. But the JPY bears should not forget about the Bank of Japan, which at any time can intervene in order to stabilize the JPY exchange rate.

Schedule for this week:

Monday, April 15
15:30 (12:30 GMT) - USA. Retail Sales;
15:30 (12:30 GMT) - USA. NY Empire State Manufacturing Index.

Tuesday, April 16
05:00 (02:00 GMT) - PRC. Industrial Production;
05:00 (02:00 GMT) - PRC. GDP;
05:00 (02:00 GMT) - PRC. Retail Sales;
09:00 (06:00 GMT) – United Kingdom. Employment Change;
15:30 (12:30 GMT) - Canada. Consumer Price Index (CPI);
16:15 (13:15 GMT) – USA. Industrial Production;
20:00 (17:00 GMT) - United Kingdom. Bank of England Governor Andrew Bailey Speaks.

Wednesday, April 17
02:50 (23:50 GMT) - Japan. Trade Balance;
03:30 (00:30 GMT) - Singapore. Non-Oil Exports;
09:00 (06:00 GMT) – United Kingdom. Consumer Price Index (CPI);
11:00 (08:00 GMT) – South Africa. Consumer Price Index (CPI);
12:00 (09:00 GMT) - Eurozone. Consumer Price Index (CPI).

Thursday, April 18
04:30 (01:30 GMT) - Australia. Employment Change;
15:30 (12:30 GMT) - USA. Initial Jobless Claims.

Friday, April 19
02:30 (23:30 GMT) - Japan. Consumer Price Index (CPI);
09:00 (06:00 GMT) - Germany. Producer Price Index (PPI).

Sluggish economic growth in the Eurozone, accompanied by uncertainty around further actions of the European Central Bank, had a negative impact on the dynamics of the single European currency throughout January. Against this background, the pre-New Year's rally did not continue in January, and the Euro was again under pressure.

After the New Year celebration, market activity was quite low, but it did not prevent the Euro from losing almost all of its gains in December and falling to the support at 1.0800. US Fed Chairman Jerome Powell, in his comments, questioned the lowering of the interest rate at the March meeting, which only added negativity to the single currency.

Nevertheless, the ECB intends to achieve full control over inflation and, despite its slowdown, may delay the lowering of the interest rate. Taking this into account, it is possible that the EUR/USD exchange rate will achieve some balance and limit the downside potential, so bears should be cautious. At the same time, there are no reasons for a large-scale growth of the Euro at this stage, and its pullbacks can be used for selling.

The main factor that influenced the financial markets and became the reason for widespread risk-taking by investors was the expectations of three interest rate cuts in the spring of '24 after the relevant statements of US Fed Chairman Jerome Powell.

Thus, speculators actively got rid of the US dollar and even more actively bought shares, which led to the growth of stock indices to fresh highs in several cases. In addition, the "Christmas" factor, a traditional bullish factor during Christmas, played a significant role in the stock market rally.

Despite the correction at the beginning of the new year, the bulls continue to control the situation, allowing for a positive outlook for the near future. Nevertheless, corporate reports and US inflation data may change investors' sentiment, so the bulls should be extremely cautious at current levels, as the fate of the Christmas rally may depend on these factors.

Despite Saudi Arabia's efforts, the dynamics of oil futures in November can hardly be called positive. Continuing the voluntary unilateral reduction of oil production, the country's authorities expected a steady price rise for black gold. Still, market participants had a bearish view of its prospects.

The OPEC+ meeting, which again agreed to cut production, was able to cause only a short-term rise in oil prices, which was used for selling. The slowdown in the Chinese economy raised concerns about demand from the largest energy consumer, which offset the OPEC+ efforts.

In addition, the US shale producers' production ramp-up added to the bearish factors, which also undermined Saudi Arabia's efforts. Nevertheless, the oil bears should not ignore them, as the risks of some oil deficit still remain on the market, and the situation may change at any moment.

The main factors that had a significant impact on the financial markets last week were the Hamas attack on Israel and the beginning of the war between them, as well as the rapid growth of US government bond yields. Against this background, investors got rid of risky assets and actively bought gold and the US dollar.

The stock markets suffered greatly from those mentioned above, where there was a very large-scale fall in indices. High-interest rates in the US contributed to the growth of government bond yields, so the Fed's keeping the rate unchanged last week and the cooling of the labor market significantly reduced the probability of further increases, and investors' risk appetite returned.

At this stage, the indices have recovered much of their losses, which may encourage the bulls to buy more. Nevertheless, the Fed intends to keep interest rates high for an extended period, with another hike still possible depending on incoming data, so bulls should be extremely cautious.

Last month, the US dollar dominated the pairs with many of its competitors, supported by strong macroeconomic data on the United States and related expectations of at least one more interest rate hike by the Federal Reserve.

The factors supporting the dollar were joined by the rapid growth of US government bond yields, which also caused investors to flee risky assets. Against this background, sellers became active on stock markets, and stock indices ended the month in the negative zone.

Although indices are trying to form a "bottom" this month, and dollar bulls are fixing profits on long positions, there is no reason for optimism at this stage and the dollar may be bought back on the fall, and stock indices may resume falling. Events in the Middle East have added uncertainty, creating risks of developing more global military conflict.

The last month of the outgoing summer was generally positive for the U.S. Dollar. Although consumer inflation continued to decline, investors focused their attention on the incoming macroeconomic data for the U.S., which showed the stability of the country's economy.

At the same time, published data on the Eurozone and Germany could only instill anxiety about the outlook for the economies and, therefore, pressure the Euro. A slowdown in the growth rates of the Eurozone and German economies could force the ECB to pause its September meeting, which would also be negative for the Euro.

The Japanese yen, of course, became the undisputed "champion" of the fall against the U.S. dollar in August. The refusal of the Bank of Japan to abandon its ultra-soft policy against the background of tightening monetary policies of other global central banks does not leave the yen a chance for sustainable growth. Still, the scale of its fall and the proximity of the lows may cause dissatisfaction with the Bank of Japan and corresponding actions/rhetoric, so the yen bears should be extremely careful.

A sharp decline in the growth rate of consumer inflation in the U.S. became a reason for speculation about the Fed's imminent interest rate cut. Against this background, investors actively got rid of the U.S. dollar, which led to its fall in the first half of July this year.

Nevertheless, the United States economy continues to grow steadily, and Fed officials remain hawkish in their comments. Moreover, the interest rate was raised again by 25 basis points at the last meeting, and it is predicted that the September meeting may also see an increase, which brought the dollar bulls back to the market.

As a result, by the end of last month, the dollar was able to recover its earlier losses, and its growth may continue in August. Still, it may depend on the consumer inflation data and other macroeconomic indicators published later this week. Thus, dollar bears should distrust any signs of dollar weakness and not neglect safety measures.

In June, the British pound maintained positive dynamics in pairing with the euro and the U.S. dollar. The Bank of England unexpectedly raised the interest rate level by 50 basis points at once, which added to its upward momentum, within which it tested the resistance at 1.2850.

Nevertheless, commercial banks in their lending policy are guided by the interest rates of the central bank, and their increase means more expensive mortgage loans for the population and, in turn, risks to the financial stability of banks. Thus, although the pound returned to the maximum of the week after the decline, its further advance above may face certain difficulties.

The slowdown in consumer inflation in the U.S. questioned the need to buy gold as a defense against inflation. Against the background of the liquidation of long positions, its quotations by the end of the month tested the level of 1893 dollars per ounce, where there was interest in buying. Expectations of Fed interest rate hikes and slowing inflation do not justify the growth of gold, so the recovery of its quotations may face fresh selling interest.

The U.S. dollar was in demand in May, allowing it to regain some of its losses after falling against major peers. The U.S. Fed raised the interest rate by 0.25%, although some analysts expected at least a pause in the cycle of increases or even a rate cut amid bank failures.

This supported the dollar, while the euro, British pound, Australian dollar, and New Zealand dollar ended the month lower. Nevertheless, the best times for the dollar are likely behind us, so the growth of the dollar may be limited, and bulls should be extremely cautious.

Oil futures began the month with a massive drop. Still, a warning from Saudi Arabia about the consequences for bears brought buyers back into the market, and black gold entered a consolidation phase, trading in a very wide range. OPEC+ production cuts remain supportive, but the risks of a global economic recession put pressure on futures. Failure by the bulls to break through the highs of the month could lead to a new stage of a bear market.

Anton Kharitonov, Traders Union Analyst

Throughout April this year, the US dollar remained vulnerable, declining against its main competitors. There was still pressure on it from the Australian and New Zealand dollars, but they failed to break the month's highs, and the monthly closing was in the support area.

Speculators did not rush to buy the Aussie and the Kiwi amid the prevailing anti-risk sentiment and the RBA's refusal to raise the interest rate, taking advantage of which the Euro demonstrated a fairly large-scale growth against these currencies.

That's why both currencies started to look undervalued, so at the moment, they show positive dynamics, and in case of breaking through the resistance against the USD, they might continue growing. Nevertheless, the risks for them, especially for the Australian dollar, are caused by the escalation of relations between the PRC, the USA, and Europe, against which their growth might be limited.

​Last month, the US Federal Reserve raised interest rates once again while signaling a possible pause in the cycle of increases. The bankruptcy of two American banks and problems with the Swiss bank Credit Suisse created a threat of another financial crisis; in order to fight it, the Fed might have to start cutting the rate.

​In February, the US dollar was most in demand, allowing it to win back part of the losses in many pairs, particularly in pair with the Japanese yen. Despite the expectations that the Bank of Japan would change its monetary policy after the arrival of a new leader, the yen was under pressure throughout the month.

​In January, the US dollar continued to lose positions across almost the entire spectrum of the market. Its sales were caused by the expectations of the US Federal Reserve slowing down the pace of raising interest rates, while several other central banks were in the active phase of the fight against inflation.

​The last month of 2022 has been good for many US dollar competitors. The release of softer data on consumer inflation in the US, which gave reason to expect a slowdown in the Fed's interest rate hike, contributed to the pressure on him.

​In November, the demand for risky assets dominated the financial markets, which was also supported by the expectations that the US Federal Reserve System would slow down the increase in interest rates. At the same time, other world central banks are expected to maintain the same pace, which positively affects the exchange rate of a number of currencies.

​In October, the US dollar bulls decided to take a break and take profits on long positions, against which many dollar competitors won back their losses. By the month's end, Euro was able to rise to the level of 1.0089, and the British pound - up to 1.1628.

In September, the US dollar strengthened again against many of its competitors, in particular against the British pound. A weakening economy, an energy crisis, a change of government pushed the pound lower and lower until it reached 1.0328 due to a massive sell-off.

The fall might have continued, but the Bank of England decided to intervene in the situation in the form of intervention in the bond market. This could have a positive impact on the dynamics of the pound, and possibly stabilize it. Thus, its return to the September low is unlikely, but there are no reasons for a large-scale increase at the moment.

The Bank of Japan was also forced to carry out foreign exchange intervention due to the ongoing fall of the yen, thanks to which it managed to win back part of the lost positions, but soon the US dollar, together with it, returned to highs. Although the dollar's position still looks strong, its overbought condition may be the reason for a larger correction.