December 11, 2016
First, a review of last week’s forecast:
- Last week’s forecast for EUR/USD considered a number of scenarios, all of which came true with a close to 100% accuracy.
Let us start with the fact that on December 2, when giving an interview to one of the world’s reputable financial publications, NordFX Senior Analyst John Gordon warned that, in connection with the referendum in Italy, it was likely that there would be a gap at the opening of the week's session. He also said that, despite the increased volatility, nothing close to the exchange rate jumps following Brexit would occur. This forecast proved to be true.
65% of surveyed analysts believed that the pair would once again test the end-of-year low of 2015 at the level of 1.0510. On Monday, the pair indeed fell to the 1.0505 mark. Graphical analysis specified that this might be followed by a serious rebound to the resistance in the 1.0900 zone. And on Thursday, following the news from the ECB, the pair rose to the level of 1.0873. Then it went down to the main support line for the end of November, consistent with the indicator readings on D1, which had been suggesting a medium-term sideways trend;
- As for the behaviour of GBP/USD, there was a dispute last week between the indicators and the experts. Most of the former pointed to the north, even though they signalled that the pair was overbought. The latter insisted that the pair should go down at least to the level of 1.2510. They turned out to be closer to the truth. Despite the slight increase in the pair at the beginning of the week, starting Tuesday it abruptly went down - by Friday it had lost more than 200 points;
- The main forecast for USD/JPY was based on the fact that the pair would continue fluctuations within the boundaries of the February-March 2016 corridor. In general, this version proved to be correct, with some predominance of bullish sentiment towards the end of the week;
- USD/CHF. Here, 70% of experts, graphical analysis, and 80% of indicators on H4 voted for the pair's drop to at least the level of 1.0000. On Thursday, as predicted, the pair fell to the 1.0020 mark. After completing the task, it seemed to have decided to appease the remaining 30% of analysts, who spoke of a sideways trend, and rose first to the lower border (1.0070) and then to the top border (1.0200) of the aforementioned channel.
Forecast for the upcoming week:
Summing up the opinions of several dozen analysts from world leading banks and brokerage companies, as well as forecasts based on different methods of technical and graphical analysis, the following can be suggested:
- Predicting the future of EUR/USD, most indicators are actively advocating the sale of this pair even though on H4 25% of them say it is oversold. The analysts are divided along the following lines: 50% believe in the pair’s upward rebound, 35% support a continuation of the downward trend, and the remaining 15% vote for its lateral movement. Graphical analysis, as it often happens, points to a compromise. According to its readings, the pair may first rebound to the 1.0650 resistance and then continue to the south - first to the 1.0510 support and then, perhaps, even further to the March 2015 lows in the 1.0460 vicinity. At the same time, we must note that a decision by the US Federal Reserve on the interest rate is pending on Wednesday 14 December, and if it is finally increased, it could significantly strengthen the dollar against other world currencies;
- With regard to the future of GBP/USD, some 60% of experts believe that the pair will go down to the 1.2400-1.2500 zone. However, as in the case of EUR/USD, a number of indicators say it is oversold. Thus, it can be assumed that the pair will stay in a lateral channel within 1.2550-1.2700 for a while. Both indicators and graphical analysis on D1 agree with this;
- USD/JPY. Most likely, for the first half of the week the pair will try to stay within the boundaries of the horizontal corridor, which it first entered two weeks ago. Its more distant future, as mentioned above, will be determined by the decision of the US Federal Reserve on interest rates, in anticipation of which the bullish sentiment will continue to dominate. The support levels are 114.40, 113.10, 112.00. The resistance levels are at 116.70 and 118.70;
- USD/CHF. Here, 70% of experts, graphical analysis, and most indicators on H4 and D1 believe that the pair will continue to grow. The 2015 maximum (1.0300) is hailed as the target. After it is reached, according to graphical analysis readings, the pair may once again fall into the 1.0050-1.0115 zone.
Roman Butko, NordFX