July 2, 2017
To begin with, a few words about the forecast for the previous week, which was a week full of speeches by senior Central Bankers globally. Forex trends were influenced by the ECB head Mario Draghi, as well as his colleagues from the Bank of England Mark Carney and Bank of Japan Haruhiko Kuroda. It goes without saying that the week would not be complete without the statements of the head of the US Federal Reserve, Janet Yellen.
- EUR / USD. The past week clearly showed that the opinion of the majority is not necessarily correct. Recall that, even though about 90% indicators on H4 voted for the growth of the pair, this forecast was supported by only about 10% of analysts. In their opinion, the pair had to first rise to the resistance at 1.1285, and then even higher to 1.1400. This is what happened - the pair was firmly entrenched in the zone 1.1390-1.1445 by the end of the five-day period;
- As for GBP/USD, 45% of analysts voted for its growth, which was supported by indicators on H4 and graphical analysis on H4 and D1. The bulls identified 1.2815, 1.2920, 1.2975 and 1.3045 as target levels. Backed by "hawkish" statements by Mark Carney about a possible increase in interest rates on the British pound, the pair took the first three heights with ease and came close to the fourth, finishing the week at 1.3025;
- USD/JPY. Here the main forecast was that the pair would once again try attempt to take the height of 112.00, and that this attempt would prove fruitful. This forecast turned out to be 100% true: the pair not only managed to reach this height, but also exceed it by almost 100 points. It then rolled back to finish at 112.40;
- The bears (30% of all forecasters), insisted that USD/CHF should test the local minimum of 0.9610 again. And indeed, after some hesitation, the pair went southwards, mirroring the movements of EUR/USD. On Wednesday, it reached this support, broke through it and spent the rest of the week in the side channel 0.9550-0.9600.
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:
- EUR/USD. It should be noted that, because of a powerful breakthrough last week, the pair reached the upper boundary of the side channel it had been moving in for over two years, ever since the winter of 2015. Perhaps that is why the experts are rather confused, being divided into approximately three equal camps: 40% favor the pair’s growth, 35% support its fall, and the remaining believe in a sideways trend.
If we look at the graph of W1, we can see that the pair escaped the limits of the said channel for a short period of time on two occasions: in August 2015 and in May 2016, reaching 1.1715 in the first case, and 1.1615 in the latter. So, from the point of view of graphical analysis, there is still potential for growth of the pair. However, a whole quarter of the oscillators on D1 already signal that the pair is overbought.
Do not forget that this week we are expecting a sufficiently large amount of data on the US economy to be published, a lot of which, according to forecasts, is positive for the dollar. For example, it is expected that one of the most important indicators, NFP (the number of new jobs outside the agricultural sector) may increase from 138K to 170-180K, which will provide significant support to the bears, and they will be able to drop the pair below the level of 1.1300;
- GBP/USD. Here, as in the case of the EUR/USD, both graphical analysis and the absolute majority of trend indicators and oscillators point northwards, believing that the pair should rise to at least 1.3120-1.3180, and then, possibly, by another 200 points. However, considering that the pair is now close to a very strong support/resistance level and is also approaching the 2017 high, a rebound is certainly plausible. In this case, the targets levels would be 1.2815 and 1.2760.
As for the opinion of analysts, 55% of them expect the pair to fall within the next few days, whilst 90% believe it will fall in the medium term;
- USD/JPY. Here, 40% of experts and almost 100% of indicators voted for the growth of the pair. The resistance levels are 113.10, 113.60 and 114.35. An alternative point of view is supported by 60% of analysts and only one indicator. The nearest support levels are 111.80, 110.80 and 110.25. Another possibility, suggested by graphical analysis on H4, has the pair grow to 113.10 and then fall to 112.00;
- The last pair of our review is USD/CHF. Next week, 75% of experts and a similar proportion of indicators expect the pair to fall to the zone of 0.9465-0.9520. The remaining analysts expect the pair to rise to 0.9650. And, as in the previous case, the alternative case is proposed by graphical analysis, which suggests a back and forth dancer in the lateral channel of 0.9520-0.9650. When it comes to the more distant future, almost 80% of experts expect the pair to return to the zone of 0.9860-1.010 in August.
Roman Butko, NordFX