December 26, 2016
First, a review of last week’s forecast:
- Giving the forecast for the EUR/USD pair, 60% of analysts, 85% of indicators, and graphical analysis on D1 pointed out that the pair should continue to fall to the 1.0300-1.0350 area at the very least. That was indeed what happened: on Monday the pair descended drastically and hit 1.0351 the next day, short of the intended target by just 1 point. Evidently deciding that it fulfilled its task, the pair rebounded and returned to the values of the beginning of the week;
- The forecast for the GBP/USD pair may also be considered fulfilled by at least 90%, if not 100%. Recall that the majority of experts voted for the continuation of the downward trend, naming the support at 1.2300 as the nearest target. This was reached by the pair on Thursday. After this, the support changed roles, becoming resistance. The pair rebounded off it and subsequently fell by 50 points;
- USD/JPY. Here, one third of oscillators and graphical analysis suggested a possible downwards rebound of the pair. As for the analysts, most foresaw a sideways trend with a Pivot Point at 118.00. The fact that the pair was overbought did indeed push it down at the very start of the week’s session. Then, having rebounded off the level of 116.55 as was expected by the experts, it returned to the 118.00 zone and shifted to a slightly bear-dominated lateral movement of diminishing amplitude;
- USD/CHF. Here, more than half of experts, supported by graphical analysis on D1, and 95% indicators on H4 and D1, suggested that the pair would try to gain a foothold above the level of 1.0300. However, it seems that the proximity of the Christmas holidays weakened the strength of bulls so significantly, that having reached the height of 1.0320, the pair almost immediately turned around and returned to the values of Monday, where it stayed until the end of the week.
The forecast for the upcoming week - the last one before the New Year:
The market’s major players have already summed up the year, and most analysts have already left for Christmas. Therefore, the forecast for this festive week is based mainly on technical analysis. No major events that could shake the financial markets, are expected in the coming days, and traders can expect a very quiet and relaxing five days ahead. Unless, of course, something extraordinary happens.
- The medium-term forecast that analysts released last week does not give a clear picture of the future of EUR/USD: 35% of them predict an upward trend, 40% a downward trend, and 25% a side movement. As for technical analysis, graphical analysis on H4, and the vast majority of trend indicators and oscillators, all of them point eastwards. Those on D1, on the other hand, indicate to the south. Based on the above, we can assume that next week the pair will move in a sideways channel in the 1.0350-1.0520 range. As for its further decline, it is necessary to take into account that at present the pair is near the bottom border of the side corridor, which was launched back in February-March 2015, and that any future strengthening of the dollar will largely depend on the actions of team of the US President elect, Donald Trump;
- In contrast to the European currency, analysts consider the British pound’s future to be more definite. Thus, in the medium term, 65% of them support a fall in GBP/USD down to the October low of 1.1940, and only 5% expect the pair's growth. 100% of indicators and graphical analysis on D1 agree with the majority of experts. However, on a shorter timeframe - specifically H4 - the forecast for the coming week includes a flat trend in the 1.2215-1.2325 range. The next resistance is at 1.2375;
- USD/JPY. It is clear that most of the indicators on D1 point northwards, with which their colleagues on H4 disagree, indicating the pair to be oversold. This opinion is shared by graphical analysis on H4, which sketches a decline of the pair to 115.50, followed by a rebound the previous week’s values in the 117.50 zone. As for the graphical analysis on D1, it foresees a lateral channel with support at 116.50 (should that be ruptured the new support will be 115.50) and resistance at 119.00. Here we can mention the upcoming speech of the Governor of the Bank of Japan Haruhiko Kuroda on Monday, 26 December - that is unlikely to seriously influence the behaviour of this pair;
- Opinions on the future of USD/CHF tend mostly towards the pair’s growth to the 1.0300-1.0400 area. This point of view is shared not only by three-quarters of analysts, but also by indicators on H4 and D1, as well as by graphical analysis using a daily time-frame. An alternative view is supported by 25% of experts and graphical analysis on H4. In their opinion, the pair should once again test the December low at 1.0000.
The next forecast will be devoted to the events of the first week of January. Dear colleagues, it seems, therefore, that now would be the time to wish you a Happy New Year!
Roman Butko, NordFX