October 27, 2018
First, a review of last week’s events:
- EUR/USD. When giving the forecast, we assumed that none of the events noted in the economic calendar would be able to considerably shake the market. And we were right: the market reacted rather sluggishly even to the ECB chair Mario Draghi 's statements and to the US GDP data, which turned out to be 0.2% higher than expected.
Our second forecast for the past week was the growth of the dollar, which had been supported by 70% of the experts. And it did strengthen against the euro by about 200 points. The EUR/USD pair was going down neatly, step by step, as if by staircase, for the whole week, until it reached the level of 1.1335. After that, the euro won back 65 points, and the pair completed the week in the 1.1400 zone;
- GBP/USD. Recall that more than 90% of experts, supported by the absolute majority of indicators, had expected a further fall of the British currency. The forecast turned out to be absolutely correct, and the pound lost about 300 points. The pair’s chart practically repeats the EUR/USD chart: a decline accompanied by regular corrections until the very end of the week, when the pair stopped at 1.2825;
- USD/JPY. If when giving the forecasts for the European currencies, the experts had expected the dollar to rise, here their opinion was just the opposite: the yen should have strengthened, albeit slightly, against the backdrop of the US-Chinese trade wars. The immediate targets were named as the levels of 112.00 and 111.65. They were alternately reached by the pair, it groped the bottom at 111.37 and ended the week in the 111.88 zone;
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. The majority of analysts are still waiting for further strengthening of the dollar. Although, this majority is small, 55% vs. 45%.
There will be a lot of various economic events next week, among which we would note two events. The first one is publishing of the Eurozone GDP data for the 3rd quarter on Tuesday, October 30. If it turns out to be no worse or at least the same as in the 2nd quarter, this can play in favor of the euro.
As for the dollar, the data on the labor market (including NFP), which will be released on Friday, November 2, may side with it.
At the time of writing this forecast, the vast majority of trend indicators and oscillators are colored red. However, 10% of the oscillators are already giving signals that the pair is oversold on D1, which is a precursor to a possible strong correction, as a result of which, according to the indications of graphical analysis, the pair can rise to the level of 1.1450 or another 80 points higher, to the level of 1.1530, and then continue to fall.
The goal of the bears is the year's low of 1.1300, which was fixed on August 15. The pair is unlikely to go below this mark before the mid-term elections in the US on November 6 and the Fed meeting on November 8. Although one cannot exclude any attempts to break through this support;
- GBP/USD. The pound has already reached the September lows in its fall, the next goal is the 2018 lowest point, 1.2660. And 70% of experts do not see serious obstacles to achieve it.
The Brexit problems have not disappeared, the country's economy is lame, and the threat of Prime Minister Theresa May’s resignation has been added to all this. As a result, the British pound is quickly losing its attractiveness to investors and is moving from being from a refugee currency into the category of risky assets.
However, 30% of analysts are still hoping for a rebound upwards, amid this bleak picture. This can be facilitated by the fixing by major players of the monthly profit on the dollar, as well as by the positive news following the Bank of England meeting on Thursday, November 01. As a result of the rebound, the pair may return to the zone 1.3045-1.3255. The nearest resistance is 1.2930.
The indicators' readings for the pair almost 100% repeat the readings for the euro/dollar pair: almost all of them are colored red, and only 10% of the oscillators signal that the pound is oversold.
A compromise version is offered by the graphical analysis, according to which the pair may move in the side channel 1.2800-1.2930 for a few days;
- USD/JPY. By Friday, October 26 evening, the pair stopped its fall and, having turned, was able to break through the strong support/resistance level of 111.80. Most experts (70%), supported by graphical analysis, believe that this is a clear signal to the next strengthening of the dollar and the rise of the pair to at least 112.85. The following goals are 113.35 and 114.55.
The remaining 30% of analysts vote for the alternative scenario. They hope that the Bank of Japan meeting, and the speech of its head Haruhiko Kuroda on Wednesday October 31 will be able to support the Japanese currency and help it reach values in the 110.75-111.40 zone;