October 1, 2017
First, a review of last week’s forecast:
- The Fed decision on a fourfold increase in the interest rate in 2017-18 continued to dominate over the pair EUR/USD, as well as the results of the German elections, not ideal for Frau Merkel. Thanks to these factors, as predicted by most experts, the euro lost more than 230 points by the middle of the week. However, later it played back some losses, rising to the horizon of 1.1815;
- As for the GBP/USD, here again the dollar showed growth, but not as impressive as in the case of the euro. The British pound lost only about 100 points over the past week;
- USD/JPY. 85% of analysts, supported by one third of oscillators on D1, were expecting a correction of this pair down, after which the uptrend was supposed to continue. That is exactly what happened, however, the correction was less than expected. It was already on Monday, September 25, that the pair dropped to 111.50, after which it turned and continued its growth, reaching the height of 113.25 on Wednesday. As for the end of the week, it completed the five-day period at the level of 112.50, which gives grounds to speak about the gradual slowdown of the upward momentum;
- USD/CHF. 80% of the experts, the same number of indicators and graphical analysis on D1 indicated the level of 0.9770 as the weekly maximum for this pair. And they were 100% right: it was exactly this height that was reached on September 27, and it was there that the local trend reversed, resulting in the pair finishing even 20 points lower on Friday than at the beginning of the week.
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 on the basis of a variety of methods of technical and graphical analysis, we can say the following:
- the situation for the pair EUR/USD looks extremely uncertain, thus the opinions of the experts are split exactly in half, 50% of them are for the growth of the pair, 50% are for its fall. As for trend indicators, on H4, two thirds of them are colored green and one third are red, and on D1, it's the other way around. Oscillators on H4 give priority to the green colour as well, thus entering irreconcilable conflict with the red oscillators on the daily time frame.
As for graphical analysis, according to its readings, the pair will again try to get close to the height of 1.2100 in the next 2-3 weeks, after which it will turn to the south. The main target in this case will be support 1.1660.
One should bear in mind that the results of the ECB meeting on Wednesday, October 4, as well as the publication of data on new jobs created outside the US agricultural sector (NFP) on October 6, can influence the trend formation. As expected, this figure may fall from 156K to 98K, and even to 75K. It is generally believed that such a sharp decline in the NFP leads to a weakening of the dollar. However, large players have often played against this rule recently, as a result of which many traders incur serious losses;
- speaking about the future of the GBP/USD, most analysts (55%) look to the south. Trend indicators on H4 and graphical analysis support the bearish mood as well. On D1, graphical analysis suggests that by the end of autumn, the pair will fall to the lower boundary of the medium-term rising channel, which began this January. The target is 1.4670. The nearest resistance in this case is 1.3500.
As for the rest of the experts, only 20% of them voted for the rise to 1.3600, and 25% are for the sideways trend. All oscillators and trend indicators on D1 have taken a neutral position as well;
- USD/JPY. 55% of analysts, supported by graphical analysis and 25% of oscillators, believe that the pair entered the correction phase, and now it expects a temporary decline to the area of 111.00-111.50.
An alternative point of view suggests that there will be no correction, and the pair will continue to move north without stopping. This opinion is supported by 45% of experts. The ultimate target is the upper boundary of the medium-term horizontal channel at the level of 114.50.
The Japanese Prime Minister Abe also plays into the hands of the bulls, having decided to dissolve the lower house of parliament and hold early elections on October 22;
- The forecast for the pair USD/CHF assumes that the pair will move in the side channel 0.9585-0.9770 for a while. At the same time, one third of the oscillators are giving signals that it is overbought, proceeding from which one can expect first its fall to the lower border of the corridor, and then a rebound upwards. More than 60% of experts, trend indicators on H4 and graphical analysis on H4 and D1 agree with this point of view.
Roman Butko, NordFX