Forecast for 2010 — Forex, Gold, Oil, Rates

The forecast for 2009, that was posted by me on January 3rd this year, came out to be not very accurate but definitely better than the one for the year 2008. I’ve missed largely with the USD-based pairs (especially GBP/USD — a parity! What was I thinking about?!), but the yen-based forecasts fulfilled almost perfectly. Although the oil fluctuated quite close to my forecast $75 for the second half of the year, its bottom was forecasted at $30 by me but it didn’t move below $36.80 in 2009. As for the interest rates — I’ve been expecting a rise of the inflation in the second half of 2009, which would make the central banks to increase the rates. In reality it turned out that the near-zero rates were sustainable (and still are) and that the economies can enjoy cheap liquidity without giving out the higher prices.
For the year of 2010, I continue my forecast tradition and will present not only Forex forecast, but also my projections about gold, oil and interest rates for the year to come. You can also see what the readers of this blog expect from 2010 and you also can offer your vision of 2010 global economy in my forecast poll (voting is open until January 15th).
EUR/USD is ending 2009 in a long-term uptrend but the behavior of the pair in 2010 will be determined by the interest rate decisions of the Fed and ECB. In the bearish scenario we might see a consolidation of EUR/USD between 1.16 and 1.37. A bullish scenario is less probable, in my opinion, but can lead to the growth of the currency pair to 1.65–1.70 levels.
GBP/USD is hard to predict, but the weakness of the economy of U.K. will be doing its cause and we might see a return to 1.36–1.47 range in 2010. A bullish scenario is possible only if the pair is capable of breaking the resistance level formed near 1.68.
USD/JPY ends 2009 in a strong bearish trend, but the controversy is in the dissatisfaction of the Japanese authorities with the strong yen, which hurts their exports. I am quite sure that USD/JPY will be artificially held above 80.00 level, which at some point may generate a carry trade uptrend with the targets near 100.00 or 110.00.
EUR/JPY is consolidating in a rather tight range that may break either up — to near 160, or down — to 110–120.
Oil may become even less important commodity (from the investor’s point of view) in 2010, which will reduce the speculative part in its price, helping it to trade more stably. A broad range between $60-$90 looks to be comfortable both for producers and consumers during the global economy’s moderate growth.
Gold is a hype. In 2010 it still can continue to be a hype, but the recently started correction may hit some huge hedge funds’ stop-losses and then we’ll see $600-$800 per ounce. In case of the continuation of the gold’s crazy rally, I see $1,500 like a rather conservative target for the next year.
Interest rates:
Almost everyone expects some rate hikes from the Federal Reserve starting from June 2010. That looks like a probable scenario, but the housing market is still in a deep pit in the United States. In my opinion, the regulator may decide to postpone the rate increases until September. Anyway, we can end this year with 1%-1.5% federal funds rate.
ECB is usually faster on rate increases as the inflation is its main concern, but the rate for the main refinancing operations may continue to be at 1% for a rather long period of 2010 with the support of the manufacturing lobby from France and Germany. 2% looks to be a probable end-of-the-year value for the Eurozone’s interest rate.
The Bank of England has its current bank rate at a historical minimum of 0.5% and this can’t continue for too long. The financial system of the Great Britain strongly depends on selling the bonds that, to be attractive for the investors, require a lot higher interest rates. BoE may show quite fast rate hike streak, ending the year 2010 close to 3%.
The Bank of Japan has no reason and no excuse to raise the country’s interest rates. The current 0.1% may still look adequate enough even in December 2010.

If you have want to comment this currency, gold, oil and rates forecasts for the year 2010, please, feel free to reply using the form below.

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