Summary of USD / KRW forecasts

USD / KRW forecast: S1 2021
Price: $ 1,145 – $ 1,150
Price factors: FED, US policy, market sentiment
USD / KRW forecast: 1 year
Price: $ 1,200 – $ 1,230
Price factors: US inflation, tightening monetary policies, positive risk sentiment
USD / KRW forecast: 3 years
Price: $ 1,160 – $ 1,170
Price factors: global politics, higher bond yields, US / Korean economies

The USD / KRW has mostly traded sideways over the past few decades and it doesn’t look like the future will change much in this pair other than the momentum within the range. We saw two major crisis-time peaks in this pair, once during the crisis of the late 1990s in Japan and East Asia which pushed this pair up quite close to 2 and the other time during the 2008-09 global financial crisis. Although since then the USD / KRW has been trading sideways in a range of 250 cents.

There are good trading opportunities in the range, however, buying near the low and selling near the high. Right now, this pair is trading near the bottom of the range after finding support at 200 SMA (purple) on the monthly chart as shown above. Although the rebound was quite weak, since the USD was also weak, but while the US dollar fell across the board in April-May 2021, the won did not benefit, suggesting that a Once the USD gains a little strength, the rebound will pick up again and probably push this pair up the range by the end of the year.

Recent USD / KRW price changes

Period Change ($) Switch %
6 months +25 + 2.3%
1 year -89 -7.4%
3 years +44 + 4.1%
5 years -56 -4.8%
Since 2000 -14 -1.2%

Factors Affecting USD / KRW

South Korea is a developed economy, with a high human development index, which is the main engine of the country’s economy, since the main sector has been technology and high technology. Although in 2021, investments exceeded the GDP growth of the technology sector. The Korean economy has recovered well from the 2020 coronavirus crisis, surpassing 2019 levels, helping to maintain the Won auction, while on the other side of the coin, the US dollar remains still quite low, despite the American economic boom. But, the dollar is waiting for the Fed’s decision to change course, which will also give the USD / WON a higher push.

USD / KRW live chart

USD / KRW

USD / KRW price forecast for the next 5 years

Currencies at risk should have fallen since March 2020, with the coronavirus maintaining the sense of moderate risk in financial markets, as governments continue to turn restrictions on and off and the global economy shifts from recession to strong rebound, then to another recession. But, the excessive amount of money that flooded the markets, from governments and central banks around the world, kept them alive. On the other hand, the USD has fallen for political reasons, as economic fundamentals look strong right now. The large amount of USD injected into the markets has also contributed to the weakness of the USD and more money is on its way to the United States which will benefit developing countries like Mexico and the peso. However, the rise in US Treasury yields and the technical picture that is oversold for this pair should be seen as red flags for USD / MXN bears as this could just as easily be the end of the bearish retracement before the bullish trend does not resume.

Korean economy benefits from large form of global manufacturing

The manufacturing sector has resisted the coronavirus better than any other sector, as it has remained largely open, even at the height of lockdowns. Employers were urged to take steps to keep workers away from each other and production continued which was great as imagine the opposite if there were shortages of food and other goods. In fact, after the short-lived drop in March-April 2020, manufacturing rebounded and continued to expand, reaching the highest production levels in decades all over the world. Chinese manufacturing has been odd, as it persists just above the contraction, whereas before the coronavirus it was leading the world.

It sounds odd, but South Korean manufacturing has been on the rise since last year’s spring dip, which was weaker than in most other countries. Since then, manufacturing activity has grown, with the Bank of Korea’s BOK Manufacturing BSI index reaching 100 points. Industrial production follows an upward trend and with the global economy rebounding after reopening in summer, Korea’s high-tech exports will only increase, meaning manufacturing and industrial production will see even better times. to come up.

The headline CPI (Consumer Price Index) has risen above 2% which is the BOK’s target and stands at 2.3%, although the Bank of Korea is keeping rates d interest at an all-time high of 0.5%, as confirmed by Chairman Lee Ju-yeol. . Domestic consumer confidence has also improved significantly, but South Korea’s economy is mainly an export and import-oriented economy, so increasing global demand will further improve this sector and the economy. economy.

The US economy is absolutely racing

In the first wave of the coronavirus, the global economy collapsed, including the US economy, although the US economy fared better than other economies and rebounded faster. It began the strong rebound from last summer and continued to maintain a good pace of expansion over the past winter as well, as other economies entered a second recession. With large amounts of money that have been pumped into the economy by the FED and the US government, the US economy in particular has exploded so far in 2021 and expectations for the coming months are even brighter as some coastal states that had restrictions such as California and New York are also reopening for the summer.

The manufacturing sector was leading the economic rebound and now services and other sectors have joined this economic expansion, with the manufacturing and services PMI indicators rising well above 60 points, suggesting some kind of economic boom. The trillions of dollars along with improved consumer and business confidence have pushed prices up. Headline CPI inflation jumped more than 4% in April, while the core CPI which removes volatile food and energy products rose 3%. That’s well above the Fed’s target of 2%, as GDP grew 6.4% in the first quarter of 2021, which is significant.

Although the FED ignored the data and viewed inflation as transient, which meant it had to keep pumping money with the current stimulus packages that kept the dollar bearish. But with the economic boom and surging inflation will force them to accept reality and start reversing the extremely lax monetary policy. Now the question is who will come first, the tapering or the increase in interest rates. Monthly payments for the coronavirus will also run out by September, meaning the unemployment rate will continue to fall as more people return to work.

USD / KRW Technical Analysis – Side Trade for Over a Decade

The rebound of the 200 SMA has started, but the other MAs offer resistance at the top

The USD / KRW was trading below 1,000 until the late 1990s when it soared as the Korean economy took a hit, following the recession in the Japanese economy, when it boomed, really approaching 2,000. The price retreated and eventually fell below all the moving averages on the monthly chart, falling again below 1,000, but the 2008-09 crisis pushed the dollar up again and this pair climbed above 1,600. It fell again, but the price has not fallen below 1,000 since then. In fact, this pair has been trading sideways for over a decade, with a slight upward bias as lows rise and highs too. The 200 SMA (purple) has turned to support now but the rebound has not been convincing. There was only one decent bullish candlestick in January and since then the candlestick has been mostly dojis, closing around the open price.

The 200 SMA Checks Buyers on the Weekly Chart

On the weekly chart, we can also see that the price has traded mostly sideways over the past decade. The lows in the range were around 1,000, but they have increased and the last reversal of the lows was around 1,080. Highs have also increased over the past decade, forming an ascending channel. on the weekly chart. The 200 SMA (purple) did a great job as a support and the resistance indicator because the price has moved up and down within the range. It provided resistance at the start of the decade, then it turned to support in the middle of the previous decade and now it has reverted to resistance. Buyers have failed to break this moving average twice over the past few months, preventing them from bouncing off the 200 SMA on the monthly chart above. The previous week’s candlestick closed as a doji below the 200 SMA which is a bearish reversal signal and this week the price has turned bearish again. But, the 20 SMA (gray) holds as a support for the moment at least. Thus, buyers find it difficult to carry USD / KRW up the range, although if the Fed shows signs of reversing monetary policy then the USD will enter a bullish phase and this pair will end up cross the 200 SMA.