After a choppy finish to the fourth quarter, the markets will be looking ahead to a new trading year and the first quarter. There are a lot of events in store which is likely to see the first quarter of 2017 turn quite volatile as most of the events are concentrated in Europe. Outside of this, the UK’s Brexit plans and the mid-January swearing in of president elect Donald Trump will herald a new era in politics where uncertainty will be the main theme. Here are the Top 5 predictable currency pairs in Q1 2017.
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We start off with gold and look at the charts from the fourth quarter. Gold prices broke down below the 1215 handle and extended their declines to 1160 – 1143. This marks a retest of the previously formed resistance level that was broken in February last year. The monthly candlestick has closed at 1151.67 after falling to 1122.71. The Stochastics are also nearing the oversold level and this could signal a near term upside. Mind the resistance at 1215 level where we can expect gold prices to correct in the first quarter. Overall, gold prices are likely to remain range bound within 1250 – 1150 levels but the bias is to the downside.
- Traders can play the range, buying at the current levels, targeting $1215 or selling near the $1230 – $1215 region, targeting $1100
- Although there might be some near term risks in Europe’s elections, gold prices are likely to follow to the tune of the FOMC which has signaled three rate hikes in 2017 and looks increasingly possible.
The fundamentals from New Zealand are starting to change slowly and this could potentially translate into the RBNZ either keeping rates steady or hiking interest rates. No changes are expected in the first quarter, but a pickup in inflation could increasingly validate this view. From last quarter’s forecasts, NZDUSD is still a few cents shy of hitting the 0.6800 support level. We expect price to continue to the downside. In the first quarter, NZDUSD could be seen bouncing off 0.6800 and retrace its gains back to 0.7200 – 0.7250 resistance level.
However, despite the bullish fundamentals, the U.S. dollar remains on a firm footing which indicates continued declines in the near term. For the first quarter, NZDUSD could remain range bound within 0.6800 and 0.7200 with further declines expected on a break down below 0.6800.
CHFJPY is one of the more unique pairs which is also a bit complicated to trade. With both the Swiss franc and the Japanese yen termed as a safe haven, the price action in CHFJPY can at times be erratic and volatile. Adding to the mix is also the SNB’s intervention in the markets to devalue the Swiss franc. However, the technical outlook is clear where we expect CHFJPY to extend its current rally to the resistance level at 120 – 118 region. This medium term retracement is likely to see CHFJPY post a reversal at this level. Traders can therefore look to buying the dips on CHFJPY towards 120 – 118 while waiting to short the Swiss franc near the resistance level. The longer term target remains to the downside towards the 100.00 psychological round number support. Also keep an eye out on the monthly (14, 3, 3) Stochastics which is likely to post a hidden bearish divergence near the resistance level.
AUDJPY has closed with pin bar on the monthly time frame with the Stochastics showing a hidden bearish divergence. While the bias remains to the upside, expect to see a near term decline towards 80 – 79 region. On the economic front, Australia continues to battle with low inflation and low growth, but things could change as the fourth quarter inflation and GDP figures are expected to be released during the first quarter of 2017. The RBA on its part is expected to keep interest rates unchanged which could see the Aussie attempt to post a modest recovery. The yen remains the key in the equation with the Bank of Japan staying on the sidelines for the most part last year. There is potential that Japan’s inflation will also rise in the coming months which could mean that the BoJ will continue to keep monetary policy unchanged. Look for the decline to 80 – 79 region for an upside target to 91.00.
EURJPY has broken out from the inside bar’s range last month and the upside is expected towards 126.80 as the initial target. However, expect EURJPY to post a modest decline back to the upper end of the range near 118.50 – 118.60 level. The euro will most likely come under pressure as the elections from Germany and Netherlands will pose a near term fundamental risk. This could mean short term weakness in the euro in the run up to the elections but the overall bias remains to the upside, largely thanks to a Japanese yen that looks potentially weaker.
Hopefully you found this list to be useful. If we have enough comments, we will continue with this list every quarter. 2017 will be awesome for all of us and we wish you a wonderful year ahead with us.