© Reuters.
By Senad Karaahmetovic
Investing.com — price has had a strong couple of months. The major hit a 20-year low in September 2022 when it traded in the low 0.95s. EUR/USD has hit a major resistance line in recent days, signaling a pullback may be occurring soon.
As of January 16, 09:05 ET (14:05) GMT, EUR/USD trades at 1.0816.
Here we look at the EUR/USD forecast for 2023, including comments from highly-rated FX strategists.
Strong rally to end 2022
Increasing bets that the Fed will slow down the pace of has yielded a strong rebound with EUR/USD price rallying over 14% since September.
The strong end to 2022 has also paved the way for outperformance in the first two weeks of this year. The problem for EUR/USD bulls is that the zone around $1.09 offers a very strong resistance, in the context of an ascending trend line connecting two major lows (January 2017 and March 2020).
Given how strong it acted as support on the way down, analysts expect this area to pose strong resistance to EUR/USD bulls as they attempt to recoup all losses from 2022. EUR/USD opened in 2022 just below the 1.14 handle.
Morgan Stanley raises EUR/USD 2023 forecast
Morgan Stanley FX strategists slashed their 2023 year-end forecast for the USD. They now see the finishing the year at 98 with the greenback especially struggling against the euro.
“Global growth is showing signs of buoyancy, macro and inflation uncertainty are waning and the USD is rapidly losing its carry advantage,” FX strategists wrote in a note.
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 to record negative returns for 2023, citing domestic growth challenges.
“Within emerging markets, we see an approximately 5% total return until the end of the year… Outperformers include those that will likely be sensitive to a recovery in the Chinese economy, including those currencies which were underperformers in 2022 such as the Chilean peso,” strategists wrote in a note, according to Reuters.
Bank of America sees 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.
“We expect EURUSD to strengthen to 1.10 by end-2022 and to 1.15 in 2024, towards its long-term equilibrium, but with many risks. EURUSD has already moved to the consensus end-2023 forecast and very close to ours. 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,” the strategists wrote to clients.
From the valuation standpoint, the EUR is “undervalued,” the strategists added. While the recent run-up in EUR/USD price has made the picture more balanced i.e. EUR/USD not “excessively” undervalued, the BofA FX…
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