Forex and Cryptocurrencies Forecast for 2022

Forex and Cryptocurrencies Forecast for 2022

2022-05-21 | Selina Mathew

Forex and Cryptocurrencies Forecast for 2022


EUR/USD: Down First, Then Up



The world economy is recovering from the COVID-19 pandemic's consequences, and this trend will continue in 2022. At least. This year's prediction for global GDP growth of 6% has been maintained. According to preliminary projections, growth will continue at around 5% next year (unless there are fresh "surprises"). However, this is an average measure, and the rates of recovery of individual nations' economies will have an impact on the rates of their national currencies. Since the start of the epidemic, the EUR/USD pair has shown quite distinct vector behavior.


The pair was already at 1.2350 in early January 2021, having started at 1.0635 in March 2020. The vigorous pumping of the US economy with a big dollar mass as part of the US Federal Reserve's monetary stimulus (QE) strategy has influenced the dollar's decline.


The market has a sense of increased stability and the coming winding down of QE with the start of a new 2021 and the entrance of a new President Joe Biden in the White House. Even more so since macroeconomic data, especially inflation and labor market recovery, were positive.


By the end of March, the dollar had gained strength and the EUR/USD pair had fallen to 1.1700.


However, dovish feeling prevailed among the Fed's leadership, money continued to be pumped into the economy, the start of the quantitative easing programme was postponed indefinitely, and hiking the base interest rate was ruled out. The pair then climbed beyond the psychological milestone of 1.2000 once again, reaching a high of 1.2265.


The struggle between Europe's central banks and the US central banks did not end there. While the ECB's language remained dovish, certain Fed officials' remarks had already taken on a severe hawkish tone.


Investors began to expect the Fed to begin rolling back QE at the end of this year and finish it in 2022, allowing the discount rate to begin rising in early 2023. The dollar gained ground once again, bringing the pair back to 1.1700.


The American regulator did not reveal any precise intentions for reducing the monetary stimulus programme during its September meeting. However, if decision-making dynamics continue unchanged, the Fed will be six months ahead of the ECB.


Many analysts expect that the dollar will continue to gain in late 2021 and the first part of 2022 on this premise. The pair will continue to go south in this instance, first to support 1.1500, then to 1.1200. Some fervent bears believe that the pair may even plummet to March 2020 lows.


According to some projections, the US economic position would stabilize in the second half of 2022, while the "slow" Eurozone will begin to gather traction. Reduced European QE and a hike in the euro interest rate might revert the trend and restore the pair to the 1.1700-1.2000 range.


It is obvious that the pair's dynamics are influenced by a variety of variables on both sides of the Atlantic, including political, economic, and, more recently, epidemiological concerns. Another important actor is China, which has a significant impact on both the Old and New World economies. As a result, it's important to remember that everything expressed is based on a current picture of the situation, and it can (and should) change several times during the following months.


Virtual and Real Gold Cryptocurrencies


While the major currency pair EUR/USD has a general comprehension and political and economic reason for expectations, cryptocurrency appears to be considerably more confusing. Despite the claims of influencers, this market appears to have been more of a hotbed of mass speculation in the last 1-1.5 years than a dependable investing platform. Although the year is not yet done, bitcoin has already risen from $28,550 in January to $64,800 in April, then fallen to $29,300 in July before rallying again, albeit on a lesser scale.


The BTC/USD exchange rate is impacted not just by actions made by US regulators and the Chinese government, but also by Elon Musk's emotions. One of his tweets might either make you a fortune or break you. That is why, even without holding a single token in stock, NordFX brokerage allows its clients to profit not only from the rise, but also from the decrease of cryptocurrency rates. Why take the chance of purchasing bitcoin and then selling it? After all, you may immediately open a sell trade.


Nobody knows the actual price of the reference coin. Expert perspectives differ greatly. Some, like Standart Chartered, estimate $100,000 by the end of this year, while others forecast $100,000 by the end of 2022.


And some, such as Nobel Laureate Robert Schiller, believe the bubble will collapse shortly, burying the two trillion dollars or more that investors have put into the market.


The pace of the Fed's monetary stimulus (QE) programme winding down, the possibilities for the Fed raising interest rates, and the dynamics of treasury yields will all play a role. These are reasons that can significantly lower institutional investors' risk appetite and cause them to revert to safer financial products.


Standard Chartered's prognosis for ethereum is as positive as bitcoin's and appears to be highly enthusiastic. In an interview with Reuters, a price range of $26,000-35,000 per coin was revealed.


But even that isn't the maximum, especially if the bitcoin price reaches $175,000 by the end of 2022.


According to a forecast published in Forbes by the large investment firm Goldman Sachs, the base cryptocurrency may lose its leadership position to ethereum. The potential to build new applications, according to Goldman Sachs, is the key reason for the main altcoin's appeal. As well as the fact that numerous financial products may be substituted using its platform. This covers, for example, loans and other banking activities.


A lot of experts feel that actual gold, not digital gold, has more growth potential in 2022 than it does now. They do not rule out the possibility that the XAU/USD pair may breach the August 2020 high of $2,200-2,300 per ounce. However, as previously said, the price performance of this reserve asset will be determined by investors' readiness or unwillingness to assume risks.


On Thursday, April 28, the DXY index, which measures the US dollar against a basket of six other major currencies, reached a new 20-year high. The explanation for this development remains the same, as we have previously stated: the Fed began tightening its monetary policy ahead of other major central banks. At its next meeting on May 4, the FOMC (Federal Open Market Committee) is projected to boost the benchmark interest rate by 0.5 percent. This is the absolute minimum. For example, James Bullard, the president of the Federal Reserve Bank of St. Louis has not ruled out a 0.75 percent rate hike immediately.


In the face of the US Fed's hawkish behavior, other national regulators are acting far more slowly (or not at all). Their economies are recovering more slowly from the COVID-19 pandemic's crisis, making it difficult for central banks to immediately reduce monetary stimulus (QE) and raise borrowing costs.


Of course, the European Union faces further economic losses as a result of the sanctions put on Russia as a result of the military invasion of Ukraine. Keep in mind that the EU countries rely heavily on Russian energy supplies.


In this environment, the dollar continued to pressurize the euro, and the EUR/USD pair broke the five-year bottom on April 28, plunging to 1.0470. As a result, the European currency has lost almost 700 points just in April. At the end of the five-day period, there was a modest bounce, with the price ending at 1.0545.


The level of 1.0500 acts as a support, which might result in a decrease in the amount of short positions and, as a consequence, a pretty significant correction to the north. If this does not materialize, the bears' next target will be the 1.0325 low from 2016.


It's feasible that the euro and the dollar could soon be at 1:1 parity. Much, however, hinges on what happens to the interest rate at the US Federal Reserve meeting on May 4 and what the regulator's management says at the news conference that follows.


Analysts' votes are practically evenly divided at the time of writing. 35 percent believe the dollar will continue to strengthen, 30 percent believe the reverse, and the remaining 35 percent are waiting to see what happens. With the present dynamics of the pair, it's not unexpected that 100% of the trend indicators and oscillators on D1 are tinted red, even if 25% of the latter send signs that the pair is oversold.


The nearest support is around 1.0500, followed by the low of 1.0470 on April 28, and the bears' next targets for EUR/USD are outlined above. 1.0550-1.0600, 1.0750-1.0800, 1.0830-1.0860, 1.0900-1.0935, and 1.1000 are the closest resistance zones.


The agenda for the next week includes, in addition to the Fed meeting, the publication of statistics on retail sales in Germany and business activity in the US manufacturing sector (ISM) on Monday, May 02. The next day, ECB President Christine Lagarde is slated to speak. On Wednesday, May 4, we shall learn the total amount of retail sales in the European Union. On the same day, the ADP report on private sector employment in the United States will be released.


On Friday, May 6, another set of statistics from the US labor market will be released, including a key indication like the number of new employment outside the agriculture industry (NFP).

GBP/USD: The Pound Reaches a Two-Year Low, and We Wait for the Bank of England Meeting


The bulls' struggle for 1.3000 was lost, as we indicated in the last analysis. When asked if there would be a counteroffensive, the majority of experts (65%) said no, and that the pound would continue to plummet. The GBP/USD pair struck a local bottom around 1.2410 on Thursday, April 28th, defying the oversold signs.


In June 2020, it was at this level for the last time. The final chord of the week sounded like it was in the 1.2575 range.


Not only will the US Federal Reserve meet next week, but the Bank of England will as well. The UK regulator is expected to boost the interest rate from 0.75 percent to 1.0 percent, according to predictions. However, because the Bank's meeting is on May 5, a day after the Fed, the nine members of the MPC (Monetary Policy Committee) will have time to revise their positions in light of their foreign counterparts' decisions.


Meanwhile, ahead of both summits, the great majority of experts (70 percent) remain impartial. 15% of them believe the British pound will continue to decline, while the same percentage believes the pair will correct to the north. On D1, the red indications continue to have a complete advantage: 100 percent across both trend indicators and oscillators. The bears' immediate goal is to break through the 1.2500 support level, with subsequent objectives for the pair's slide at 1.2400, 1.2250, 1.2075, and 1.2000. The bulls will confront opposition in the zones of 1.2600, 1.2700-1.2750, 1.2800-1.2835, and 1.2975-1.3000 if they manage to seize the initiative.


The PMI (Purchasing Managers Index) for the manufacturing sector will be released on Tuesday, May 3 as part of the publication of information on the UK economy. The next day, a day before the Bank of England meeting, the Composite PMI and the PMI for the services sector will be released. On Friday, May 6, PMI for the UK construction industry will be released, rounding out the picture of economic activity.


USD/JPY: The yen has dropped to a 20-year low.


What else is there to expect?


At 131.25 yen per dollar, a new anti-record for the Japanese currency was set. In the first part of the week, the USD/JPY pair made a southward correction, rising to 126.92. However, following the Bank of Japan's meeting, we saw a fresh rise of 433 points. This was followed by a 190-point bounce and a 129.75 finish.


Some analysts predicted that the Japanese regulator will ease up on its ultra-easy monetary policy. Furthermore, numerous government officials have already stated that Japanese people are dissatisfied with the rise in inflation and that, in light of the activities of the US Federal Reserve, it is time to modify monetary policy. The Bank of Japan, on the other hand, stuck to its guns, maintaining its negative interest rate (-0.1 percent) and expressing its willingness to buy an infinite amount of bonds each session if necessary.


Many observers predict that the Central Bank will keep its loose monetary policy in place through 2022, as well as substantial incentives, at least through fiscal year 2023.


Rising US 10-year Treasury rates, which jumped 48 basis points to 2.83 percent in April alone, widened the gap with comparable Japanese assets. The upshot was that the pound sank to a two-year low, the euro to a five-year low, and the yen to its lowest levels in twenty years!


Although 35% of analysts believe the bulls will reach new heights, 50% believe the contrary. The remaining 15% are neutral, waiting for the Federal Reserve's May meeting. On D1, all trend indicators and oscillators are pointing north, while 15% of oscillators are indicating that the pair is overbought.


Although Bitcoin has had a bumpy start to the year, analysts believe it will eventually reach $100,000 — and that the question is when, not if.


Bitcoin's price climbed back above $30,000 on Thursday, a gain of about 3.5 percent in the last 24 hours. Over the last week, the leading cryptocurrency has fluctuated near $30,000, as both traditional financial markets and cryptocurrencies have struggled to regain upward momentum.


Investors are concerned about growing inflation, geopolitical tensions, and the potential of the US Federal Reserve tightening monetary policy.


In recent months, the crypto market has been increasingly linked to the stock market, making it even more dependent on global economic variables.


With no end in sight, analysts predict that the conflict, inflation, and shifting monetary policy in the United States will create even greater volatility in the coming weeks and months.


In a market research note dated May 19, Edward Moya, senior market analyst at foreign-exchange firm Oanda, said, "Bitcoin was pulled down with other risky assets as Wall Street experienced the largest loss in over two years." "If the de-risking continues, Bitcoin will remain a dangerous asset."


Over the last four months, Bitcoin has only been above $45,000 for a few brief periods, and it hasn't been above $50,000 since December 25, 2021. Despite this, Bitcoin has remained above its 6-month low of $34,000 set in late January. Despite the ups and downs, Bitcoin's current price is still a long way from its all-time high of $68,000 set in November. Despite the current price drop, Bitcoin is still worth more than twice as much as it was only a few years ago. These types of ups and downs are nothing new for Bitcoin.


Despite the volatility and recent price drop, many analysts believe Bitcoin will eventually cross the $100,000 milestone, however there are differing viewpoints on when that will happen. According to a recent poll by Deutsche Bank, approximately a quarter of Bitcoin investors anticipate the price of the cryptocurrency to exceed $110,000 in five years.


The volatility is nothing new, and it's one of the reasons why experts advise new crypto investors to be cautious when committing a portion of their portfolio to cryptocurrency. Bitcoin has risen in value as steadily as any other cryptocurrency on the market over the years.


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