May 28, 2017
First, a review of last week’s forecast:
- As we wrote last time, whilst experts and technical analysis make predictions, it is politicians that make reality. The President of the United States Donald Trump spent the past week in Europe, causing the scandals associated with him to temporarily quiet down. This led to a lull in the financial markets, which neither the OPEC meeting on Thursday 25 May or, notably, the G7 leadership meeting could shake. EUR/USD spent the whole week in the 1.1160-1.1267 side corridor, as if waiting for new events, and finished the five-day period practically in the same place where it started: at 1.1185;
- As for GBP/USD, recall that the bulk of experts (75%) voted for this pair’s fall. They ended up being right. This forecast was of a medium-term nature, so the fall of GBP/USD by 265 points (from 1.3040 to 1.2775) can be considered only a forerunner of the inception of this trend;
- As for USD/JPY, this pair, after the shocks of the second fortnight of May, decided to take a breather, just like EUR/USD. It moved in a side channel the entire week, rotating around the 111.30 Pivot Point: the precise point where it completed the week's session;
- It is common knowledge that USD/CHF often mirrors the fluctuations of EUR/USD. This exact phenomenon was observed this time: its lateral trend was restricted to the range of 0.9690-0.9775, and the pair finished in the same place it started five days prior, at 0.9744.
Many analysts seem to think that during all of 2017 the foreign exchange market will be shaped by the unpredictability surrounding Donald Trump’s Presidency of the United States, rather than by any of the usual economic forces.
As for the forecast for the coming week, summarizing the opinions of analysts from a number of banks and broker companies, as well as forecasts made based on a variety of methods of technical and graphical analysis, we can say the following:
- If one were to draw a conclusion from conducting graphical analysis on H4, one would say that in the coming days EUR/USD expects a decline to the support at 1.1075; if it breaks though this support it would fall into the 1.1000 zone. The main resistance in this scenario would be in the 1.1270 zone. 60% of experts agree with this forecast, as do the overwhelming majority of trend indicators and oscillators on H4.
At the same time, it should be noted that on Friday the data on the US labor market (NFP) will be published: the forecasts of the NFP, a very important driving force for dollar movements, suggests a negative outlook for the US dollar. Perhaps this is why about 40% of analysts predict the growth of the pair to 1.1400, after which the pair is nevertheless expected to decline.
It should be noted that, in the medium term, the number of supporters of the EUR/USD decline exceeds 80%, just as it had been previously;
- As for the future of GBP/USD, here, quite naturally, a clear majority of indicators point southwards. However, almost 80% of experts believe that, in the near future, the pair will not fall below 1.2755 and will continue to move in the rising channel that has been prevailing since mid-March, in an attempt to break through the resistance at 1.3050. As for the medium-term forecast, almost 70% of analysts now stand on the side of the bears, saying that, in the end, the pair will return to the 1.2 400-1.2615 side channel;
- USD/JPY. When giving a forecast for the coming week, experts are divided into two precisely equal-sized groups: 50% predict the fall of the pair and 50% predict its growth. Graphical analysis, meanwhile, suggests the following scenario for H4: first, a fall of the pair into the 110.85-111.00 area, and then its subsequent growth to the resistance at 111.90; in the event this resistance is broken, the pair should reach 112.50. On D1, the expected movements of the pair differ somewhat: the drop is expected to be to 110.00, whilst the subsequent rebound is thought to be to the resistance at 112.25. As for the medium-term outlook, here the benchmarks remain unchanged: almost 80% of analysts cast their votes for the growth of the pair to 114.50;
- The last pair of our review is USD/CHF. Even now about half of the oscillators on H4 indicate this pair is oversold and recommend opening long positions. As for the rest of indicators, they have taken a neutral position, believing that the pair will stay in the sideways trend within the 0.9690-0.9775 range for a while. Almost 70% of experts agree with these latter readings, believing that the pair will definitely test the lower limit of this channel at least once more. Its subsequent fate, in the opinion of most analysts and graphical analysis on H4, is a return into the 0.9890-0.9965 zone.
Roman Butko, NordFX