The Federal Reserve speeds up its quantitative tightening, and this is certainly bullish news for the USD. At the same time, this is a negative factor for the American stocks, which have entered their seasonally worst month.
Forex predictions for 2018
Long-term forecasts are not easy to make. Yet, we will try to predict some trends for 2018.
- The global economy is doing fine, so major central banks will continue raising interest rates. Jerome Powell will succeed Janet Yellen as the head of the US central bank. He is expected to continue the same monetary policy we saw in 2017.
- Despite the optimism of 2017, it’s necessary to acknowledge risks to market stability. They are related to financial bubbles and overheating. Higher inflation and excessive debt may contribute to that. As a result, a trader has to be cautious and always use risk management tools. It will be difficult for the US stock market to show the same growth as in 2017.
- Political risks will also be present: keep an eye on Italian elections, Brexit and ongoing tensions on the Korean peninsula. Trading will likely become more volatile than it was in 2017.
- The euro can continue appreciating. Options market prices in 67% probability that EUR/USD will rise to 1.23 by the end of 2018.
- Bitcoin will remain a major newsmaker. It still has an immense potential, though be ready to big swings in its price: despite the general uptrend, it can still lose several thousand dollars of value in a matter of hours. Besides Bitcoin, there are other hot cryptocurrencies that may be very big gainers in 2018, in particular, LiteCoin, Ripple and Bitcoin Cash.
Our main recommendation for the long-run is this: don’t keep all of your funds in one place. Allocate some of your assets to stocks and bonds, have some gold, try cryptocurrencies and, of course, use the various opportunities of Forex trading!
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