After dipping below the key parity level, the pair has bounced 10% from its 20-year low. Here are the EurUsd forecasts and price predictions for 2023.
The EUR/USD pair fell back below parity in 2022, reaching a year-low of 0.9535 on September 28. This was also the lowest level since June 2002, more than 20 years earlier.
2022's bearish movement ended up totaling more than 1800 basis points between the bottom in late October and the beginning of the year when the euro was valued at about $1.135.
The EUR/USD reached a high close to 1.09 on January 18 (nearly 1400 pips above the 2022 low), correcting 50% of the prior 9-month fall in just two months.
After the highest monthly result since July 2020 (10% up in November), the spectacular rebound continued in 2023.
However, a contraction is more likely in Q1 2023, before the uptrend will resume according to the latest Eur/Usd forecasts from market leaders.
A confluence of factors will remain on watch during 2023, which will dictate if the strong showing can continue. They range from how hawkish Fed policies will be in terms of its terminal rate, China’s reopening story, the energy crisis spurred by Ukraine-Russia tensions, and the risk environment.
Key EurUsd Forecast & Price Prediction Summary
- EurUsd price prediction today: most of the forecasted gains should come in Q2. The 1st quarter should consolidate the previous gains and hold above 1.05.
- EurUsd price prediction 2023: the major investment banks' price projections are pointing towards 1.15 for the end of 2023, once the pair will break the 1.09 inflection point.
- EurUsd price prediction 2025-2030: the pair is undervalued in real terms according to ING and based on the interest rate projections, EurUsd should trade above 1.20 in the next years.
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EurUsd analysis and outlook - key drivers to watch in 2023
Here we look at the factors driving the currency pair and the euro-to-dollar forecast for 2023 and beyond from global FX strategists. What lies ahead for EUR/USD, as it continues to trade around the parity level?
The US-Germany bond yield spread appears to be less of a major driver
While the difference in yields between US Treasury bonds and German bonds may act as a stimulus for the EUR/USD, the relationship appears to be less of a driving force over the next two and ten years. The European Central Bank (ECB) has mostly been playing catch-up in terms of monetary policies, delivering a series of back-to-back 75 basis-point (bp) movements after falling behind in addressing a 40-year high in inflation.
Despite this, there have been discussions that much of the front-loading may have already been completed, and it is anticipated that the Eurozone's economically weaker than the US may prevent the ECB from adopting a more hawkish stance than the Fed. In light of this, market participants may adopt a "less hawkish" perspective by focusing on the rate downshift in the absence of additional hawkish direction from the central bank, even though three additional 50 bp increases are being priced for the ECB through mid-2023. The US Federal Reserve's decision may have a bigger impact on the pair than the ECB's decision.
The possibility of an energy catastrophe will persist until 2023
The Eurozone's efforts to diversify its energy sources away from Russia will continue to be hampered by unresolved geopolitical issues with the Kremlin into 2023. The threat of a complete cessation of Russian natural gas exports to Europe still exists, and any increase in natural gas prices could have negative effects on the euro due to continuous inflation. For the time being, larger-than-normal LNG imports and fuller-than-normal gas stockpiles have offered a cushion to ease wintertime supply difficulties.
The battle against the demand-supply imbalance, though, can go on for a while. While the final remaining pipeline transporting Russian gas to western Europe hangs by a thread, China's trend toward reopening may increase competition for LNG imports next year, creating upside risks in energy cost pressures for consumers. The price of natural gas in Europe has formed a base after falling dramatically from its peak in August, which suggests that a large portion of the selling pressure may have been taken into account. Any increase in the price of natural gas could put downward pressure on the euro.
Economic growth conditions in focus to drive longer-term direction
Because of increased cost pressures and stricter policies, the prognosis for the Eurozone's economy has been seen as a potential upside constraint for the EUR/USD this year. The Eurozone Zew Economic Sentiment Index showed attitudes that were close to its 2008 and 2011 lows, levels consistent with previous economic crises.
The relationship between the economic indicator and the EUR/USD has not always been evident, but over the last two years, it has appeared to be more in line, with the EUR/recovery USD in October being in line with a recovery in economic sentiment. As a result, any economic bottoming out will be actively monitored through 2023. Any evidence that the worst of the economic conditions has passed could focus attention and spark additional gains for the EUR/USD.
Interest rate differential could shift in favor of the euro by the end of the year
ING argues that rate differentials will start to re-assert themselves in currency market pricing. At the end of 2022, those differentials had limited influence in driving forex rates where instead, energy markets and the investment environment were more important. Arguably, those two-year rate spreads had less say as they bounced around in a relatively narrow 150-215bp range.
Yet short-term rate differentials are a good indicator of the future path of relative monetary policy cycles and, by extension, the role currencies can play in policy settings. ING’s rate strategists expect a substantial reversal in the two-year EUR:USD swap differential this year. Trading now at around 125bp in favor of the dollar, this differential could shift to 40bp in favor of the euro by the end of this year.
This would mark one of the biggest shifts in relative policy settings since 2007.
There are two points here:
- interest rates will matter more this year.
- using rate spreads alone to forecast EUR/USD, the latest relationship and bank’s rate profile forecasts would deliver a model-based estimate of EUR/USD trading above 1.20 towards the end of the year.
According to UniCredit, a narrowing of the differential between the US Fed funds and the ECB depo rate will happen in 2024 when the FED is set to cut rates. However, traders look forward and the price is influenced by the interest rate expectations, rather than the value of the differential.
How do analysts see the market moving in the coming months and years? Below, we look at some of the latest projections.
EurUsd Prediction 2023: What Do Experts Predict?
Here we look at the EUR/USD forecast for 2023, including comments from highly-rated FX strategists.
Morgan Stanley raises EUR/USD 2023 forecast
Morgan Stanley FX strategists slashed their 2023 year-end forecast for the USD. They now see the dollar index finishing the year at 98 with the greenback especially struggling against the euro.
Morgan Stanley's new forecast sees EUR/USD at 1.15 by year-end, a substantial revision to their previous forecast of 1.08.
Elsewhere, Morgan Stanley FX strategists also expect the British pound to record negative returns for 2023, citing domestic growth challenges.
Bank of America forecast a stronger EUR in 2023
Bank of America FX strategists told the firm’s clients in a recent note that they expect the EUR to strengthen against the dollar in 2023.
BofA forecast EURUSD to strengthen to 1.10 during 2023 and to 1.15 in 2024, towards its long-term equilibrium, but with many risks:
- The periphery remains a concern for the EUR, as the ECB has now turned hawkish
- Energy prices could increase again
- The war in Ukraine remains a known unknown
- China’s reopening is proving challenging
From the valuation standpoint, the EUR is “undervalued,” according to the strategists. While the recent run-up in EUR/USD price has made the picture more balanced i.e. EUR/USD is not “excessively” undervalued, the BofA forecast EUR start moving towards its equilibrium this year.
The bank thinks the latest FX positioning would more easily support a near-term EURUSD correction lower, as per their euro dollar forecast.
EUR/USD undervalued at current levels - ING
EUR/USD should continue moving higher in 2023, according to ING FX strategists. They see a “more benign environment” that could pave the way for the pair to trade “substantially higher” in 2023 and 2024.
ING’s mid-term fair value sees EUR/USD at around 1.15
At the current 1.08 level, ING estimates that EUR/USD is approximately 7-8% undervalued in real terms.
More precisely, the strategists believe that Q2 2023 could especially prove to be strong for EUR/USD on expectations that the U.S. core inflation would fall sharply.
Q2 2023 should also be the period when China re-opening trends gain a further leg higher. However, 3Q and 4Q could prove trickier for EUR/USD according to ING:
- the third quarter on the basis that the extension of the US debt ceiling could become a very contentious political debate around that period and be bad for the risk environment
- the fourth on the basis that higher energy prices could again hit the euro.
The updated 2023 EUR/USD forecasts from ING see the pair trading between 1.08 and 1.15 this year before extending to 1.18 in 2024.
EurUsd technical analysis & price prediction
From a chart perspective, can be noted that the EUR/USD's rise could be helped by a signal that is being followed closely by traders, and which was confirmed on the last day of 2022. Indeed, as we can see on the chart below, the 50-day moving average is above the 200-day moving average.
The 50-day moving average crossing above the 200-day moving average is a major bullish technical signal known as a "golden cross". The last time this signal was recorded, at the end of June 2020, the EUR/USD subsequently recorded a gain of about 1150 pips in the following 6 months.
The opposite of this signal, when the 50-day MA crosses below the 200-day MA, a signal known as a "death cross", was triggered at the end of July 2021. EUR/USD subsequently fell by more than 2000 pips in 14 months.
Fundamentals and banks' price predictions for EurUsd also highlighted 1.09 as an “inflection point” for 2023 and Q1.
Reaching the 1.09s euro will be backtesting this line or 50% Fibonacci retracement level with the potential for it to again serve as a pivot point for a correction lower. Possibly a correction to 1.05 before any further strength can occur such as to each market 200-week SMA’s and 61.8% Fibonacci in the 1.1200-1.1250.
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EurUsd price predictions based on AI
Algorithm-based website Wallet Investor’s EUR/USD forecast predicted the pair falling in the next 12 months – as of the beginning of 2023, the service’s EUR/USD forecast for 2023 expected the pair to close the year at 1.07.
In a longer-term projection, Wallet Investor’s EUR/USD forecast for 2025 had the pair potentially opening the year at 1,042 and closing it at 1,028.
The EurUsd forecast for the next 5 years is to trade below parity according to this algorithm website.
The EUR/USD price prediction for 2023 from AI Pickup was bearish – the website saw the pair averaging a rate of $1.1. The following years, however, could see a rise to an average of $1.24 in 2024 and $1.26 in 2025. The platform’s EUR/USD forecast for 2030 saw the pair trading at $1.36, before edging up to $1.39 in 2032.
The EUR/USD is expected to trade at 1.06 by the end of this quarter, according to Trading Economics global macro models and analysts' expectations. Looking forward, the agency’s EUR/USD forecast for the next 12 months is 1.01.
Algorithm-based website Long Forecast’s EUR/USD price prediction for the next 12 months – as of the beginning of 2023, the service’s EUR/USD forecast for 2023 expected the pair to close the year at 1.06.
In a longer-term projection, Long Forecast’s EUR/USD price prediction for 2025 had the pair potentially opening the year at 0,985 and closing it at 1,058.
The EurUsd forecast for the next 5 years is to trade above 1.03 according to this algorithm website.
What drives the Euro / US Dollar Currency Pair
The EUR/USD trend depends on what stage of the cycle the global economy is at. During a recession, the demand for safe-haven assets, including the US dollar, increases. As a result, the eurodollar goes down.
During a recovery from a recession, investors are not that focused on preserving money. Retail investors search for ways to multiply the deposit. At this stage, the fundamentals driving the EUR/USD currency pair are the GDP growth rates and the monetary policy of central banks.
A strong economy is a strong currency. The rapid rebound of GDP after the recession is a reason to buy securities of the country. In particular, the belief that the US economy will fully recover from the 2020 recession in the second quarter of 2021 and exceed its potential level in 2022 contributed to the S&P 500 rally by 18% from January to early August. As a result of the capital inflow into the US stock market, the US dollar was strengthening.
The GDP rate is a reliable indicator but, unfortunately, lagging. The GDP report is published a month or month and a half after the end of the quarter. Therefore, it is very difficult to determine whose economy is growing faster at a particular time, which doesn’t provide a clear picture of the current economic situation to investors. That is why forex traders have to monitor some leading indicators, such as the US and Eurozone PMIs.
The more the economy heats, the more likely the central bank to phase out the quantitative easing program and hike the interest rates. As a result, the assets denominated in the local currency grow more attractively. That is why the US dollar is currently strengthening against a basket of major currencies.
To understand the Fed’s intentions, one should track such indicators as inflation and unemployment rate. When these indicators reach the thresholds set by the Fed, the central bank starts scaling back monetary stimulus. In this case, the greenback will grow in value.
Speeches of central bank representatives are important in forecasting the EUR/USD exchange rate. The officials’ comments give a clue on how the central banks’ policies could change, and investors could develop trading strategies based on this.
EUR/USD Trading Tips
- A necessary condition to look for buy opportunities in the long term is the sync trends in the global economy. If the US GDP features robust growth, but China and the euro area face problems, look for sell opportunities.
- Monitor the global financial markets. If the S&P 500 and oil are rallying up simultaneously, it is a reason to buy the Euro versus US Dollar. If the stock index is growing and the black stuff is falling in value, or both financial assets are depreciating, it is relevant to sell the EURUSD.
- Study the history of the financial asset’s quotes. An example that took place in the past may emerge in the future as a potential EUR/USD price movement.
- Use technical indicators in trading the EUR/USD to determine the current market state and key support/resistance levels. If the Moving Averages often cross the EURUSD chart, the market is trading flat. If the price chart is above the EMA, the trend is bullish; if the price is below the indicator, the underlying trend is bearish.
- Use Japanese chart patterns and western chart patterns like head and shoulders, double top and bottom, or triangles to identify entry and exit points.
- Do not try to use all popular trading strategies; you’d better find the one that suits you best.
- Always observe the rules of your online trading system.
EUR/USD price history
The EURUSD features quite high volatility. In the beginning, the EUR/USD currency pair was trading below parity. However, starting from 2002, the euro has never been below $1. The euro-dollar all-time low is 0.82; the record high is close to 1.604.
In 2020, the global economy faced a recession, which lasted for only two months. Because of the panic in financial markets, the demand for greenback sharply increased. As a result, the EURUSD dropped to a level of 1.064, the lowest since April 2017.
Central banks launched colossal monetary incentives of trillions of dollars to support their economies. The Fed was even called crazy because of a sharp federal funds rate cut from 1.75% to 0 and the start of the Quantitative Easing at a monthly pace of $120 billion. The Federal Reserve balance sheet was growing rapidly, approaching $9 trillion, and the US dollar weakened against a basket of major currencies. In particular, the euro, from January to March, was almost 16% up and reached $1.234.
In late 2020, the euro was expected to be trading up. Many banks suggested the EURUSD should have exceeded 1.25 in 2021. Some aggressive bulls expected the euro around $1.3. In reality, things turned out to be different. Due to the slow vaccination in the EU, which turned into new lockdowns and a double recession, the euro collapsed to 1.1705.
Thanks to vaccines, investors became reassured in the global economic recovery. Furthermore, the EURUSD buyers were again encouraged to invest in Euro Dollar by a successful vaccination campaign in the EU and the Fed’s unwillingness to recognize a surge in US inflation. The pair was up to 1.226 in late May. Bulls again were aiming at 1.25, but the FOMC June projection broke the uptrend again. The Fed started talking about a potential federal funds rate hike in 2022, which encouraged investors to buy the US dollar.
After falling from 1.2275 at the start of 2021, EUR/USD started 2022 at 1.1375. The price rose to a high of 1.1495 in early February before steadily dropping to a low of 1.0380 on May 13 – a level last seen in January 2017.
From that low point, the share price rose to 1.0790 at the start of June before taking another leg lower to 1.04.
The pair briefly breached parity on 13 July, as markets reacted to US inflation figures. That was followed by an immediate rebound that sent EUR/USD back above 1.0100.
As of 15 July 2022, the pair has fallen over 12% year-to-date to trade around the 1.00 level.
EUR/USD began 2022 at $1.1375, down from $1.2275 at the beginning of 2021. Early in February, the price of the pair reached a high of $1.1495 before progressively declining to a low of $1.0380 on May 13 - a level last reached in January 2017.
The pair fell below $0.99 on September 5 for the first time in 20 years as a result of Russia shutting down its main gas pipeline to the EU, severely jeopardizing the euro zone's economic prospects.
Midway through December, the EUR/USD traded back up to around the $1.06 level due to a weaker dollar and declining US Treasury yields. The ECB increased interest rates by 50 basis points (bps) as anticipated on December 15, reiterating that more hikes will follow, and outlining plans for quantitative tightening. However, the pair benefited from a general decline in the value of the US dollar as inflationary pressures in the country continued to subside.
The euro-to-dollar exchange rate started in 2023 at $1.0703 and increased during the month of January, topping $1.08 for a brief while.
It’s important to remember that any long-term forecasts, even the EUR/USD forecast, or any other currency pair, are too unreliable to believe in. Too many factors may affect the rate of the currency pair, and it’s best to be up-to-date with what’s happening in the global arena in order to make realistic and reliable predictions.
If you do decide that trading this currency pair is something for you, and you believe in the future of the Euro vs. US Dollar pair, first, you need to decide on a suitable trading strategy for you and work it out first on a demo account, and then on a real account.
A great reason to open a trading account with CAPEX.com! We provide a user-friendly trading app with an outlook for novices as well as experienced traders and investors.
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EUR/USD Analysis and Forecast FAQ
Will EUR/USD go up or down?
Long-term forecasts are unreliable. However, the EUR/USD pair follows certain long-term trends. So, if you look at the price chart, you will notice the price repeats its actions over the long term. For short-term trades, you should check fundamental factors that usually affect the EUR/USD rate.
Will the euro go up in 2023?
According to price predictions, the euro will more likely gain against the US dollar in 2023.
What influences the EUR to USD exchange rate?
The EUR/USD rate is the ratio of the currencies of the two largest economies in the world - the EU and the USA. Therefore, important economic and political news from the EU and the US directly affects the euro-dollar rate. These, among other factors of influence, are called fundamental; in addition to them, there are also technical ones.
Is USD up or down next year?
Analysts believe the EUR/USD pair will rise in 2023. It means that the US dollar will depreciate against the euro in the forex market.