2011 Forecast on Forex, Interest Rates, Gold and Oil

Year 2010 wasn’t as rich on surprises as 2009 and 2008. That’s probably why my last yearly forecast wasn’t as inaccurate as usually. The major surprises (at least for me) were GBP/USD and gold. The former failed to move significantly up or down, while the gold prices stagnated after conquering the new record highs several times. Interest rate increases also have been delayed by the major central banks despite the fact that the economies grew faster then the World Bank forecasted.

Although I’m not a big fan of the forecasts, especially such that try to look as far as one year ahead, I don’t want to break a tradition and offer my own 2011 forecast for the currencies, interest rates, gold and oil — the most important trading instruments (to me). I don’t want you take this forecast close to heart or base your trades on it — it can be quite dangerous.

EUR/USD — looking at the weekly chart of this currency pair makes me think that we are currently at the beginning of the next bullish wave that will mark the next year. Unless some highly improbable long-term bearish breakout occurs. we’ll see the EUR/USD pair heading to the levels above 1.43.

GBP/USD — although the pound was an outsider among the major currencies in 2010 and despite the high probability for it to continue going down in the first half of 2011, overall, the next year may turn out to be positive for this pair. I see a close of the year 2011 above level 1.66 for GBP/USD.

USD/JPY, like all the yen-based pairs, suffered a deep drawdown this year. 2011 will be either very positive for this currency pair or the Japanese economy will take a lot of damage from such a strong national currency. The Bank of Japan will have to take some measures to weaken the yen and USD/JPY will benefit from it. I expect to see this currency pair between 90 and 95 by the end of 2011.

EUR/JPY will rise in 2011 even faster, as the EUR/USD is going to be up (unless some really bad thing happens to one of the Eurozone countries). A jump back to 128–135 range looks like a probable target for the euro-yen pair.

Oil may experience another bullish bubble growth next year. The dynamics of this commodity during the last weeks of 2010 suggest that scenario. If that happens, oil will probably race to its record high near $140 before falling back to its more natural $60–80 range. If we won’t see a new bubble in crude, then I expect a higher range for 2011 — $80-$110.

Gold has found its natural balance level, in my opinion. It will continue rising in 2011 but the process will be much slower than before. To me, it looks like all the big buyers already hold enough gold.

My forecasts on the interest rates weren’t very successful. Influenced by the lack of changes this year, for the year 2011 I also expect almost no rate hikes from the four most important global central banks. There is a small probability that near the end of the next year, the Federal Reserve will raise the rate slightly. Bank of England can also decide to shift the rates up and even do it earlier than the US regulator. ECB and the Bank of Japan will stay with their current rates next year.

By the way, it looks like the majority of the visitors that have participated in our recent poll regarding the EUR/USD year end price have guessed it right. I’m pleased to see such a high level of market perception among my readers :) .

P.S.: No matter how the markets behave next year, I’d like to wish you a lot of success in 2011. Earning profit on Forex is nice but I hope that your personal happiness won’t depend on the moves of some currencies and the decisions of some bureaucrats in the central banks. Happy New Year!

If you have want to comment on this Forex/gold/oil/interest rates forecast for the year 2011, please, feel free to reply using the form below.

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