August 26, 2018
First, a review of last week’s events:
- EUR/USD. As expected, the US-China talks did not bring clarity: the only information came from the PRC Ministry of Commerce, which reported that the talks were frank and useful. Such a wording can be considered as the absence of specific results. Speech by Fed Chairman Jerome Powell was not revolutionary either and dropped the dollar by just 30 points.
In general, over the week, the euro rose by almost 200 points, which, in the first place, was caused by serious problems around the US president and his surrounding, which could turn into prison terms for his assistants and the criminal prosecution of Trump himself. The US decision to postpone the question of raising duties on cars from the EU played in favor of the euro as well. As a result, the pair completed the week session where 45% of experts had expected - at 1.1622, close to resistance 1.1630;
- GBP/USD. Following the euro, the British pound grew against the dollar, reaching the middle of the medium-term downtrend, which began back in spring. The pair reached the marks of the beginning of August and met the end of the five-day period at 1.2845;
- USD/JPY. Recall that 75% of analysts expected the pair to fall into the 109.00 zone, and 25% voted for its return to the levels of 111.00-112.00. The pair, according to the expectations of the majority, really went down and on Tuesday, August 21, it dropped to the level of 109.75. However, the drop ceased, and then the forecast of the remaining 25% of the experts was implemented: the pair rose to the area of 111.00-112.00, reaching the height of 111.50.The final chord sounded a little lower - at around 111.25;
As for the forecast for the coming week, summarizing the opinions of a number of analysts, 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. No results in the US-China talks, possible impeachment of President Trump. One can also add the attacks of the US president towards the head of the Federal Reserve. The latter fell out of favor with Trump because of an excessively tight financial policy and an increase in lending rates. All this still creates uncertainty in the market, as a result of which the opinions of experts are divided as follows:
- 45% of them, supported by most oscillators and graphical analysis for H4, are in favor of further weakening of the dollar and the pair's transition to the zone 1.1630 -1.1750. The next resistance is 1.1840;
- 30% of analysts still believe in the dollar and are waiting for the pair to return to the mid-August low. The nearest support is 1.1430, the target is 1.1300. Graphical analysis on D1 and 15% of oscillators, signaling that the American currency is overbought, side with these analysts;
- and, finally, the remaining 25% of experts simply could not make a decision in this situation.
If we move to longer-term forecasts, more than 60% of experts give preference to the dollar. Thus, for example, while the EU is deciding whether to continue or not stimulating monetary policy, JP Morgan analysts forecast the euro/dollar rate at the level of 1.1000-1.1200 by the end of the year. The reasons are the same: Brexit, Italy and Turkey, along with other countries on the perimeter of the European Union. However, JP Morgan analysts do not exclude the rise of the European currency to the level of 1.1900 afterwards, but this will not happen until spring 2019;
- GBP/USD. According to the graphical analysis, the future of this pair looks as follows: first growth to the upper boundary of the descending channel (zone 1.3000-1.3080), then rebound and fall first to support 1.2660, and then even lower, to the level of 1.2585. As for the indicators, there is a complete confusion among them. Some signal that the pair is overbought, some say it is oversold, some are painted red, others are green or neutral gray. A similar confusion can be seen among the experts as well. However, when we look at forecasts for autumn, the picture becomes more clear - here it is already more than 65% of analysts who talk about the growth of the pair. The targets, however, are still rather vague - from 1.3100 to 1.3500;
- USD/JPY. The yen continues to be pressured by low inflation, which speaks of weak demand and hinders the GDP growth. The head of the Central Bank of Japan Haruhiko Kuroda has once even promised to commit hara-kiri if inflation does not reach the target of 2%. But the price increase is still extremely weak and has not even reached 1%. However, let's hope that Mr. Kuroda will not rush to fulfill his deadly promises.
Meanwhile, the regulator continues the stimulating policy of negative rates and large-scale buying up of assets. Against this background, even despite the US-China trade wars and other US problems, the dollar may continue its growth. At least that's what 65% of experts think, indicating 112.00, 113.50 and 114.70 as targets.
An alternative point of view is represented by 35% of analysts, graphical analysis on D1 and 20% of oscillators giving signals that the pair is overbought. If this bearish scenario gets a continuation, the pair is expected to go down to the area of 109.75-110.10. The nearest support is 110.75;