2022 was very chaotic so far. Wars, famine, inflation, and many huge companies turned out to be Ponzi schemes. There was no time to take a rest. Events were quick to happen. How were major currency pairs behaving in this situation? How did the European energy crisis affect the EUR and its parity against the USD, JPY, and CHF? In this article we will discuss currency markets now and how they could look in 2023. Before going further a disclaimer must be included here: this article is for educational and entertaining purposes only and not financial advice to buy or sell anything. Just educated guesses and current tendencies are presented in a complete and easy-to-read way. EUR/USD, GBP/USD, USD/JPY, and USD/CHF will be the main focus of this article.
Best methods used for currency analysis
There are two main types of market analysis every trader must know and use. Fundamental and technical. Fundamental refers to macroeconomic factors and main economic indicators which define the main medium and long-term trends for currencies. Technical analysis uses charts and price data to catch shorter-term trends and find the optimum entry points. Some technical traders who are trading in short timeframes use only technical analysis, but the fundamental analysis will help achieve success in FX trading combined with comprehensive technical analysis tools. The best practice is to analyze the market through fundamental analysis and then use technical analysis to catch important trends and movements.
Currency markets in 2022
Before we say anything about 2023, let’s first analyze how currency markets behaved in 2022. War in Ukraine, rising energy prices, and inflation worldwide devastated economies. How did it all affect currency markets? So, fundamental analysis for 2022 shows a grim picture. A major war in Europe with one country being nuclear and rich with gas and oil and another being the main grain and wheat supplier for the world. This conflict has tremendous consequences for the entire world. Besides the obvious nuclear threats, the world has to prevent famine as well. Add to this the inflation in the US and you can see the macroeconomic picture is mostly bearish. The US Fed is raising interest rates in an effort to stop inflation, thereby reducing the economic growth rate. All these fundamental factors will define how the world economy progresses in 2023. But we should not forget technical analysis for the major pairs as well.
For EUR/USD the 100-day EMA provided a good dynamic resistance throughout the year.
If we look at the EUR/USD chart it is obvious that fundamentals were reflected in EUR/USD price as well. EUR had a good recovery in the end and it looked like the European economy was still able to strengthen against the USD in spite of the major energy crisis. Since winter is at the door and the first half of 2023 isn’t looking good this could mean we could see a good downward rally once again in 2023. EUR/USD is testing $1.00 right now and depending on where it starts going the next level will be around $1.08 for resistance and $1.030s for support. These levels will be critical to watch in the upcoming weeks of Jan. 2023.
GBP/USD has a similar overall outlook as the EUR/USD pair and has started to move bearish recently. There is a good chance that $1.21 will give a good fight before it can go any lower.
Almost the same situation in the GBPs department as we can see from the charts. RSI has now started to move downward from overbought levels. Overall good pair to watch for early 2023.
Going on to the next pair, the USD/JPY seems like 100-day EMA wasn’t powerful enough to maintain its status as a good dynamic support but since the pair is still testing these levels at 139.0 it is a good idea to watch carefully how the price action behaves before jumping into any conclusion. The overall trend for 2022 was bullish for the USD and JPY was losing some value.
We could see a nice rally if the price makes it above the 138 level. Let’s see how it all plays out for USD/JPY next year.
Our final major currency pair is USD/CHF. $0.92 turned out to be a powerful zone for this pair. Generally, USD/CHF was in a sideways market during 2022. Now it seems USD/CHF is going to test the $0.94 level. It is hard to predict what will happen on this one as it failed multiple times to establish a trend. But a failed double top at $1.005 is definitely a sight to behold. It is almost as perfect as described in many handbooks and well, it failed as miserably as many textbooks about trading.
Currency market predictions for 2023
So, what can we expect for 2023? From fundamentals it seems that USD can strengthen vs all other currencies, sometimes technical charts agree to some level. To be objective and think logically we shall see a good bearish trend for EUR/USD and GBP/USD. USD/JPY to has a high chance of continuing upwards further declining JPY value and the 152 level will be most important in this case. For USD/CHF chances of a bearish trend is high also.