October 15, 2017
First, a review of last week’s forecast:
- Recall that an overwhelming majority of experts expected a minor strengthening of the dollar. According to their forecasts, EUR/USD would fall to support 1.1660. This did not happen, however, and the minimum of the week was fixed 60 points higher, at the level of 1.1720. The forecast which was given by graphical analysis, supported by indicators on H4 and only 15% of analysts, turned out to be correct. According to this scenario, the pair was expecting a trend reversal and a move to the north, first to resistance 1.1835, and in the event of its breakdown, even higher, to 1.2035. This scenario was indeed the one that played out; however, the pair was unable to settle above the aforementioned resistance and completed the week near 1.1820;
- Speaking about the future of GBP/USD, 45% of analysts assured that the pair would be unable to break through the strong medium-term support in the 1.3000-1.3045 zone and, like EUR/USD, it would go up. About a third of the oscillators on H4 and D1 which signaled that the pair was oversold, agreed with this. The height 1.3250 was named as the final goal, which the pair reached in the first half of Thursday, after which it collapsed 140 points down. However, the bears’ joy was premature, and the bulls quickly won back losses. As a result, the pair met the weekend at the level of 1.3282;
- One of the scenarios, supported by a third of experts and most of the indicators on H4, suggested that before continuing northward, USD/JPY would test the local bottom in the 111.75-112.00 vicinity. This is what happened: the pair lost about 80 points over the course of the week and froze at around 111.83;
- USD/CHF. The readings of most indicators and graphical analysis indicated that this pair would first try to once again reach the high of the previous week at 0.9835, before returning to the support at 0.9770. It would then try to break it and, if successful, drop to the level of 0.9685. These actions did all occur, although the pair’s movement was somewhat less volatile than expected: at first the pair rose to the level of 0.9806, then returned to support 0.9770, broke it and found the local bottom at the level of 0.9700. The pair met the end of the week session in the zone of October Pivot Point 0.9745.
As for the forecast for the coming week, summarizing the opinions of analysts from several banks and brokerages, 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. Tensions with North Korea, statements about the US withdrawal from the nuclear agreement with Iran, fighting in Syria, the possible rise in oil prices, the change in the Fed leadership, the extraordinary EU economic summit: all this and much more makes the economic situation so uncertain that experts are unable to formulate any consensus regarding either the near future or the medium term. 45% of them vote for the growth of the pair, 45% for its fall, and 10% merely shrug their shoulders.
As for the indicators, they repeat the discord of the analysts on H4. But on D1, the situation is more certain: 80% of them are painted green. However, 20% of the oscillators have already turned red, signaling the pair is overbought.
Finally, graphical analysis: summarizing its readings on H4 and D1, it is possible to draw support lines at the levels 1.1750, 1.1685 and 1.1600, and resistance lines at 1.1920 and 1.2030;
- The situation with GBP/USD looks clear relative to EUR/USD, albeit by a small extent. Here, 55% of analysts, as well as graphical analysis on D1, sided with the bears, forecasting the pair’s fall to support 1.3150, and, in the event of its breakdown, 110 points lower: to the level of 1.3040.
The remaining 45% of experts and the overwhelming majority (85%) of the indicators believe that the last week's trend will continue, and the pair will rise at least to the resistance of 1.3450. The next resistance is 1.3600. However, in this case in the beginning of the week a certain downward correction is possible, since a quarter of the oscillators are already in the overbought zone;
- USD/JPY. Here, a quarter of the oscillators on both H4 and D1 indicate that this pair is oversold. This is confirmed by the opinion of most experts that the pair is on the way to the upper boundary of the mid-term side channel 108.00-114.50 and should be expected to jump upwards.
However, it is worth considering that the pair is in the Pivot Point zone of this channel now, and therefore can still move along this line for a while, oscillating in the range of 110.65-112.20;
- And, finally, the last pair of our review: USD/CHF. Graphical analysis, trend indicators and oscillators have taken a neutral position. A slight bullish overweight can only be noticed in the readings of graphical analysis on H4, according to which the pair is striving to the 0.9800-0.9835 area.
As far as experts are concerned, 75% of them vote for the fall of the pair. The support levels are at 0.9700, 0.9670 and 0.9560.
Roman Butko, NordFX