2009 Forex Forecast and Outlook: Comparing the Experts

Here we are, 2009!  As most traders are still catching their breath from record volatility in the foreign currency markets the last half of 2008, it is now time to look ahead to what we can expect for the months and year to come.  Whether you are a position trader or an intraday trader, it is important and also fun to compare the forex analysts, banks, and forex trading experts’ views when it comes to technical levels and price forecasts.  Let’s take a look at where the banks and analysts think the currency pairs will end the quarter and the year:

 
EURUSD
USDJPY
EURJPY
GBPUSD
USDCHF
 
1M
3M
1Y
1M
3M
1Y
1M
3M
1Y
1M
3M
1Y
1M
3M
1Y
BankofAmerica
1.41
1.42
1.31
88
93
104
124
132
136
1.50
1.58
1.35
1.07
1.08
1.11
BNP Paribas
1.33
1.30
1.24
87
80
92
116
104
114
1.49
1.44
1.48
1.12
1.15
1.15
Calyon
1.35
1.33
1.45
90
92
100
122
122
145
1.50
1.46
1.67
1.10
1.14
1.07
CMC Markets
1.33
1.40
1.50
91
93
80
121
130
120
1.50
1.45
1.50
1.11
1.06
1.02
Danske Bank
1.35
1.25
1.28
89
88
96
120
110
123
1.40
1.36
1.49
1.10
1.20
1.19
GFT
1.33
1.36
1.40
93
97
100
124
133
142
1.55
1.60
1.80
1.11
1.12
1.11
JP Morgan
1.28
1.18
1.23
94
87
96
121
103
118
1.60
1.48
1.55
1.17
1.21
1.21
Rabobank
1.33
1.30
1.27
93
97
105
124
126
128
1.44
1.46
1.55
1.15
1.16
1.17
Saxo Bank
1.35
1.20
1.25
88
90
95
119
108
119
1.45
1.40
1.50
1.14
1.25
1.20
UBS
1.30
1.25
1.20
90
95
95
117
119
114
1.46
1.45
1.40
1.20
1.18
1.28
        Average
1.34
1.30
1.31
90
91
96
121
119
126
1.49
1.47
1.53
1.13
1.16
1.15

 

 

Data source: FXWeek

 

Particularly interesting to compare are the 3month and 1 year forecasts for the USDJPY.  Most of 2008 this pair followed the Dow step for step, mostly in its down direction.  Will this continue in 2009?  In December we did see a divergence from this pair’s price action from the Dow movements, so time will tell.  Four of these 10 analysts are predicting the price of USDJPY to end the year in the 100’s, indicating some optimism in the markets and global economy toward the end of this year.   Also of interest are the forecasts for EURUSD, most of these bankers/analysts are expecting continued USD strength for most of the year. 
    How do these experts determine their forecasts?  GFT, which has recently been very accurate forecasting the 3 month and 1 year currency prices, reveals  some clues about how they forecast these volatile price actions in forex in the long term.  Both fundamental and technical analysis play a roll when deciding their forecasts, says Kathy Lein, Director of Currency Research at GFT, but 85% of their forecasts are based on technical analysis.  Quite simply for the long term technical forecast they analyze long term charts and plot Fibonacci retracements and extensions to figure for the next potential price points.  Fundamentally they focus on the strength or weakness of the US dollar.  But in the end, most experts will agree, forecasts need to be flexible, telling the future is not easy and so much can change one day to the next, each week, each month.
    Many economists predict the US economy to begin a slow recovery the latter part of 2009, most likely to be the first economy to emerge from this global economic quagmire.  The recent and continued USD strength lends credence to the number of market movers also believing the beloved US dollar is the best place to invest.  How long will this last?  Much can happen to change these forecasts in the next 6 to 12 months.  We will revisit this forecast at that time to see how they did.