How Did the Euro Trade in 2008?

Exactly one year ago, the Euro was trading at approximately 1.47 against the US dollar, 5 percent higher than current levels.  In 2008, this type of move is considered mild especially when compared to the Euro’s 20 percent rally against the British pound and New Zealand dollar and 27 percent decline against the Japanese Yen.   However the mild year over year change in the EUR/USD masks a tremendous amount of volatility during the year.  In the first half of 2008, the EUR/USD soared to a record high above 1.60.  After that, it fell 22 percent to a 2 year low but recovered more than half of those losses in the month of December.

How Did the Japanese Yen Trade in 2008?

The global economic turmoil and the subsequent unwinding of carry trades made the Japanese Yen, the best performing currency of 2008.  The Yen rose more than 35 percent against the British pound, Australian and New Zealand dollars and hit a 13-year high against the US dollar.  Unlike some of the other currencies, which may have seen wild swings throughout 2008, the Yen consistently strength throughout the year.  Unfortunately the remarkable rally in the Yen will also be a big reason why Japan could underperform, its peers next year.

How Did the British Pound Trade in 2008?

The British pound was one of the worst performing currencies in 2008.  It fell to a 6 year low against the US dollar and record low against the Euro in addition to selling off against every other G10 currency.  The overwhelming weakness in the currency is a direct reflection of the impact that the credit crisis had on the UK economy.  In the month of December, many currencies recovered against the US dollar, but unfortunately the British pound was not one of them.  Although the pound could continue to weaken in the first quarter, the government’s aggressive fiscal and monetary stimulus should help the country recover towards the end of 2009.

How Did the Dollar Trade in 2008? It has been an exceptionally active year in the foreign exchange market as currency volatilities hit record highs.  In the first half of the year, everyone was worried about how much further the dollar would fall but in the second half of the year the concern became how much further the dollar would rise.  After hitting a record low against the Euro in the second quarter, in the beginning of the fourth quarter, the US dollar actually surged to a 2 year high.  From trough to peak, the dollar index rose more than 23 percent in 2008. 

The so called "green shoots" seen this spring have emerged as "less bad" data show the economic decline has clearly slowed its descent. April saw the stock market move sideways, consolidating a 30% gain off the recent market lows, even as the 10-year and 30-year Treasury yields surged above 3% and 4% respectively.

Possible risks and profits to be made can always be predicted if traders would only have more accurate Forex forecast to base their trade and decisions upon. Forex forecasts are only one way of keeping up with the volatile Forex market. Success will depend the most in knowing what and who will affect the rate changes.

Mature wave structures and momentum divergence at recent highs in the EURUSD, AUDUSD, and NZDUSD favors additional US dollar strength.  The GBPUSD is contained by channel resistance.  The USDJPY trend is bearish below 96.70.

May 27 (Bloomberg) -- The U.S. recession will probably end in the third quarter, a survey of business economists showed, even as rising joblessness indicates the recovery will be weaker than previously estimated.