Forex Market Forecast for August 2023

Nick Ranga

Forex Market Forecast for August 2023

While the first half of July began as predicted, with US dollar weakness, the second half saw the US dollar make substantial gains, and the recent comments from Federal Reserve Chair Powell may see those gains continue in the near term. Elsewhere, the GBPUSD hit a high of over 1.31 in July, while the EURUSD climbed above 1.12, both hitting levels not seen since the first quarter of 2022. While macroeconomic worries still remain, inflation is easing, and so too is the uncertainty. Whether that will stay in place as we continue in the second half of the year is another question. Here are some recent talking points:

  • After a move to pause rate hikes at the end of June, Federal Reserve policymakers increased rates by 25bps in July, with Chair Jerome Powell leaving the door open for another hike in September.
  • Despite concerns about economic conditions in the eurozone, the ECB raised rates again and kept its options open for September.
  • UK inflation remains high but is easing, coming in at 7.9% for June. However, similar to the eurozone, there are also economic concerns.
  • An economic slowdown in China has resulted in worries about the impact it will have on the Australian economy, while last month, New Zealand dipped into a technical recession.

US Dollar

As mentioned earlier, the US dollar gained at the back end of July, and with recent comments from Powell leaving the door open for a hike in September, it may continue in the first part of August. The Fed said it would look at “the totality” of incoming data before making its decision. Overall, we see the US dollar losing some ground overall in August, with currencies such as the GBP and EUR climbing against it.

Key Levels

  • EURUSD: Higher – 1.1250, Lower – 1.0700
  • GBPUSD: Higher -1.3140, Lower – 1.2670
  • USDJPY: Higher – 142.10, Lower – 138.00

Euro

There are growing concerns about the economy in the eurozone, with Germany a particular concern. Even so, the euro performed okay during July, although we are not sure how long that will last if economic activity continues to slow. The EURUSD hit a high of 1.1275 in July, and pulled back following recent ECB comments. We see another leg higher in the near term, but a further fall later in the month is certainly not off the table.

Key Levels

  • EURUSD: Higher – 1.1250, Lower – 1.0700
  • EURGBP: Higher – 0.8702, Lower – 0.8460

British Pound

The pound started July tremendously well, hitting a high of 1.3140. With inflation easing but still elevated, there is an expectation of further rate hikes, which should boost the pound in the near term, giving it another leg higher against the likes of the USD and EUR. It is vital to watch any essential economic data closely as a pick-up in macroeconomic uncertainty will see the GBP weaken against risk-off currencies such as the US dollar and euro (to a certain extent).

Key Levels

  • EURGBP: Higher – 0.8702, Lower – 0.8460
  • GBPUSD: Higher -1.3140, Lower – 1.2670

Japanese Yen

Apologies, it’s set to be another month of us mentioning the talk around a potential BoJ policy shift with inflation in the country sticky. The discussion continues, but the BoJ looks set to keep its ultra-low rates, at least for now, although, according to Bloomberg, traders are wary of yield curve control tweaks. Despite the talk, the Japanese yen made solid gains against the US dollar in July, hitting a low of 137.23 mid-month. That strength against the greenback looks set to continue as we head into August. We see continued strength, especially in the early part of the month, with the pair falling towards the key level of around 138.00.

Key Levels

  • USDJPY: Higher – 142.10, Lower – 138.00
  • EURJPY: Higher – 157.95, Lower – 154.15

People Also Read:


 

Trade EURUSD with our top brokers

Broker Features Regulator Platforms Next Step
Number One Broker tickmill_logo-174% of retail CFD accounts lose money Founded: 2014
74% of retail C...
  • Well regulated
  • Ultra-fast and high leverage trading
  • Spreads as low as 0.0 pips
  • Comprehensive research tools
  • Relatively limited number of markets
  • Does not accept US traders
FSA SC MT4, MT5
Blackbull LogoYour capital is at risk Founded: 2014
  • User-friendly platform with great trade-analysis tools
  • Leverage Up To 1:500
  • Spreads as low as 0.00 pips
  • Quality trade execution thanks to high-spec IT infrastructure
  • $0 minimum account opening balance
  • 26,000 tradeable instruments
  • Not available in all jurisdictions
  • Regulatory infrastructure
FSPR MT4
Your capital is at risk Founded: 2006
Europe* CFDs ar...
  • Multi-asset broker offering a wide variety of markets
  • Strong regulatory framework
  • Innovative risk management tools
  • Choice of market-leading platforms
  • Wide spreads on some markets
  • Expiry date on Demo Accounts
ASIC, FSA, FSB, MiFID MetaTrader4, Sirix, AvaOptions, AvaTrader, Mirror Trader
Between 74-89% of CFD traders lose Founded: 2010
Between 74-89 % of retail investor accounts lose money when trading CFDs
  • Low trading costs
  • Great market flow
  • Research and analysis which helps spot trades
  • Wide range of Copy and Social Trading options
  • Limited range of non-forex markets
ASIC, FCA MetaTrader 4, MetaTrader 5, cTrader
eToro Logo77% of CFD traders lose Founded: 2007
77 % of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.
  • Social and Copy Trading Platform
  • Beginner Friendly
  • Risk-free Demo Account
  • Top-tier regulation
  • Limited means of raising queries
  • Withdrawal process isn’t really ‘client-focused’
ASIC, CySEC, FCA eToro Platform
XM LogoYour capital is at risk Founded: 2009, 2015, 2017
  • Low minimum deposit
  • Super- tight bid-offer spreads
  • Impressive trading platforms
  • Tier-1 regulators
  • Difficult to contact tech support
  • No Crypto
ASIC, CySEC, IFSC MT4 Terminal, MT4 for Mac, Web Trader, iPhone/iPad Trader, Droid Trader, Mobile Trader, MT5
FxPro LogoYour capital is at risk Founded: 2006
  • Very well regulated
  • Comprehensive education section
  • Fantastic customer service
  • No cryptocurrencies
  • Fees could be more competetive
CySEC, DFSA, FCA, FSB, SIA MetaTrader4, MetaTrader5, cTrader, FxPro Edge (Beta)

    Risk Statement: Trading Foreign Exchange on margin carries a high level of risk and may not be suitable for all investors. The possibility exists that you could lose more than your initial deposit. The high degree of leverage can work against you as well as for you.

    Nick Ranga
    Forex.com logo74% of clients lose money. Capital at risk.

    - Trusted Global Market Leader
    - Online FX & CFD Trading
    - 180+  Global Markets, 84 FX pairs, 65 shares, 17 popular indices and more
    - Forex, Indices, Commodities, Equities & Bitcoin
    - Available to US traders

    Oanda Logo77% of retail CFD accounts lose money Your capital is...
    • Choose from four high-quality platforms.
    • Good trading conditions with fast execution speeds
    • Excellent research and analysis
    • Strong client protection
    • Winner of Most Popular Broker award for three consecutive years.
    • Fees and commissions are inline rather than market-leading.
    • Satisfactory rather than impressive range of instruments.
    eToro LogoYour capital is at risk

    - Trade 15 cryptocurrencies
    - Beginner friendly