This forecast has been written on Saturday, 30th December, right before the new year of 2018. As per tradition, before forecasting what will happen next year, we first draw conclusions about what has already happened this year:
If you recall, several months ago we discussed forecasts for EUR/USD given by strategists from some of the world’s leading banks.
Out of the 80 banks that published their forecasts in June, only 23 of them predicted growth to $1.15 by year-end. Even fewer thought the pair would reach $1.18.
Analysts from the Canadian Imperial Bank of Commerce were largely bullish, believing that by the end of December the pair would be trading near $1.14. The view at Bank of America Merill Lynch was the following: 1.15 at year-end 2017 and 1.19 at year-end 2018.
Rand Merchant Bank gave an even more conservative forecast this summer, expecting the pair to be at $1.12 halfway through next year. Bloomberg’s research yielded a similar result of $1.13. BNP Paribas analysts expected the pair to reach 1.15 in Q1 2018.
Strategists from Germany’s second largest bank, DZ Bank AG, proved more accurate, but even they did not expect EUR/USD to greet the New Year near 1.20. Societe Generale, however, hit the spot.
A common adage is that there are as many opinions as there are people. We therefore attempted to unite these opinions and drew out a channel within the boundaries of 1.15–1.21 for EUR/USD. This ended up being accurate, with the pair reaching the minimum of 1.1553 on 7 November and the peak of 1.2092 two months prior, on 8 September 2017.
When it comes to forecasting the future, gauging market sentiment during the first week of January is particularly challenging; a certain degree of clarity tends to come only when markets finally re-open in the New Year. Therefore, we offer our forecast for Q1 2018, rather than the first week of January. This encompasses the opinions of analysts from a whole roster of banks and brokerages, as well as the findings of a wide range of technical and graphical analysis methods.
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Roman Butko, NordFX