The European Central Bank (ECB) ramped up expectations of additional interest rate hikes next year at its latest monetary policy meeting, and if they are true to their word, then the Euro may outperform a host of other currencies in the first three months of 2023.
The fourth quarter was a tough one for USD bulls. The currency initially held a higher-low support bounce into October trade, but bulls were unable to re-test the highs, and that led to a very strong bearish reaction in November that has run through the first half of December.
The highest inflation in 40 years triggered the Federal Reserve to embark on aggressive tightening, raising interest rates to cool inflation. That came at the cost of equities.
Gold managed to pull itself out of a situation that many traders would have considered a critical technical breakdown just at the beginning for the fourth quarter.
Crude oil fundamentals will become even more of a delicate balancing act for producers, with the most prominent of these being OPEC+, as deteriorating global growth forecasts are weighed up against renewed optimism around China’s new reopening measures.
Cryptocurrency faced major headwinds throughout 2022 as monetary tightening and recession fears took center stage. With inflation and rate expectations triggering the initial decline, the fundamental backdrop remains key for price action in 2023.
The Australian Dollar recovered going into the end of 2022 as the US Dollar peeled back from its astonishing run higher on the back of a Federal Reserve that got tough on fighting inflation.
Developments on the technical charts suggest USD/JPY could settle in a broad range before making an attempt to retest its October 2022 high sometime in the coming months.
The British Pound enjoyed a strong last quarter of the year, especially against the US dollar, as the memory of the past UK government is priced out of the market.
With the new year comes new opportunities and certainly a new technical landscape for EUR/USD and many other FX pairs.