The firm claims that the dollar’s appreciation over the 2021-22 period means there is still room for a deeper correction in the US currency’s downward momentum ahead. The firm does not expect the dollar to test the lows it hit at the end of 2020, but says the currency is expected to decline as we look ahead to next year.
They expect the USD/JPY pair to be the biggest loser after being one of the biggest movers amid rising US yields in the past few years.
Societe Generale expects the pair to fall to the 140.00 level in early 2025. Additionally, they see the EUR/USD pair retesting its 2022 highs in an attempt to reach the 1.1400 level by Q2 2025.
A word of caution is that one should always treat these forecasts with a grain of salt. They tend to be revised quite frequently based on more recent market developments. For example, Societe Generale issued a forecast in January here that USD/JPY would fall below 140.00 in the second quarter of this year and was targeting 135.00 by the end of the year. See how things turned out instead.
Given how things have played out over the past two years, the main lesson is that no one should underestimate the dollar. It certainly doesn’t make money in a cynical mood. But when you consider that many market participants were calling for its demise in 2023 and also in 2024, the dollar’s resilience has been quite commendable.