Forex Market Forecast for January 2024

We are a little late with this article, but even after one day of trading in 2024, it’s easy to see how unpredictable the market can be. Geopolitical concerns have started to rise again over the past few days, with an escalation in tensions, resulting in the safe haven US dollar making strong gains on the first day of the month. As we said in our previous forecast, sentiment can turn in an instant. Here are some key points to consider for January:

• Again, assess how geopolitical tensions will impact the markets you are trading. The escalation over the last few weeks may see a more decisive risk-off move than initially expected this month.
• Earnings season. As we head into earnings season, how the big stock names perform could impact sentiment in other asset classes.
• Interest rate expectations. Traders now are pricing in rate cuts this year. Evaluate how this could impact the currencies you are trading.

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US Dollar

Now, if we had written this a week ago, our view may have been entirely different. However, the opening trading day of 2024 means we are slightly more cautious than previously expected. While we expect to see risk on currencies climb against havens such as the US dollar this month, the increase in geopolitical tensions means that the climb may come later than expected. We will continue to assess the news over the next week, as you should also, but for now, we are sticking with our expectation of the USD being slightly weaker at the end of January.

Key Levels

• EURUSD: Higher – 1.1141, Lower – 1.0770
• GBPUSD: Higher -1.2960, Lower – 1.2440
• USDJPY: Higher – 145.00, Lower – 138.80

Euro

The euro climbed to a high of over 1.11 against the US dollar, while the EURGBP, as predicted, fell below the 0.8610 mark early in December. Looking to January, given the pricing in of US rate cuts, we see the euro rising against the dollar. Our view, as explained earlier, is based on the belief that macroeconomic and geopolitical tensions will continue to ease over the course of the month. The pair is still in an uptrend on the daily chart, but the momentum is currently taking it lower. Given the uncertainties, it is crucial to be prepared to change your market view quickly this month.

Key Levels

• EURUSD: Higher – 1.1141, Lower – 1.0770
• EURGBP: Higher – 0.8755, Lower – 0.8550

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British Pound

The GBPUSD rallied to over 128 in December, but that rise has halted over the last few sessions, with the pair now trading just above 1.26. The pound hasn’t been helped by the negative outlook on the rising economy, and there have been some calls for the BoE to lower rates. Nevertheless, we eventually see the GBPUSD climbing back toward the 1.28 level this month (again, only if geopolitical tensions ease).

Key Levels

• EURGBP: Higher – 0.8765, Lower – 0.8610
• GBPUSD: Higher -1.2750, Lower – 1.2400

Japanese Yen

November and December were great months for yen bulls, with the USDJPY dropping to as low as 140.25. Signals of a policy shift by the BoJ had fueled the rally in the JPY. However, a couple of weeks ago, it maintained its current policy, resulting in a pullback. Looking ahead, there are mixed signs. The strong downtrend in the USDJPY suggests the current pullback may not continue, but the macros suggest investors may be looking for the US dollar as a safe haven (the yen has lost its safe haven feeling of late).

Key Levels

• USDJPY: Higher – 145.00, Lower – 138.80
• EURJPY: Higher – 159.30, Lower – 151.54

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