Top 5 Most Predictable Currency Pairs for Q4 2017
The third quarter of the year saw the euro posting strong gains with the U.S. dollar extending the declines. The declines came amid investors scaling back their bullish bets on the U.S. dollar as inflation weakened. Furthermore, investors had no incentive to hold on to the greenback as the Trump administration is yet to implement the tax reforms that it promised during the campaign trail.
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Looking ahead, the fourth quarter of the year could see some volatility increase as the ECB and the Fed will be announcing further tightening of monetary policy. Most of the central banks have come out hawkish in the third quarter especially with the Bank of Canada coming out with a back-to-back interest rate hikes. Here are the top 5 most predictable Forex Pairs for the 4th quarter of 2017.
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The monthly price action in gold shows a bearish close near the resistance level of 1323 – 1309. This potentially suggests some downside pressure in the markets. Considering that gold prices were volatile in the last quarter due to the geo-political tensions, we can expect to see some short term declines in prices.
Following the bearish close, we expect that gold prices could be pushing lower in the near term. Support at 1215 remains a key level of interest. Although gold prices briefly tested this level few months ago, we expect to see a more firm retest of this support level. This view is supported by the fact that gold prices could fall amid tightening of monetary policy among most of the central banks. Therefore, watch for a decline in gold prices into the fourth quarter.
The EURGBP is another currency pair to watch. Following a strong rally in the previous months, in September, the euro was seen posting strong declines against the British pound. This comes amid weaker economic growth in the UK. However, what is working for the GBP is the fact that the Bank of England has signaled that interest rates could rise in the coming months.
The strong bearish candlestick in EURGBP on a monthly basis suggests a strong correction. Price action is consolidating within the ascending wedge pattern which could suggest a downside breakout in the near term. We see the technical support at 0.8700 which could be tested in the near term. Failure to post a reversal here could see EURGBP posting stronger declines with the potential to slip to 0.8400.
The EURJPY continues its strong rally which is now into the sixth consecutive month. The Japanese yen has weakened despite the periods when the yen was bid up amid geopolitical uncertainties.
With EURJPY clearing the resistance zone at 128.92 – 126.78, we expect to see further continuation to the upside. However, any dips are likely to stall near this resistance level which could now turn to support. The upside target for EURJPY is 138.93 which could be tested on a successful rebound off the potential support level that could be formed.
The EURUSD is showing initial signs of giving up some of the gains. However, a lot will depend on the price action near 1.1852. Failure to hold on to the support level here could potentially suggest some downside momentum.
With the ECB meeting due later in October, EURUSD could be seen falling as investors are most likely to book profits ahead of an event that is widely priced in. This increases the downside risks for EURUSD which could be seen falling to as much as 1.1300 where a test of support is pending.
#5. WTI Crude Oil
Crude oil prices were seen posting a modest recovery in September. Price action since December 2014 has consolidated into a symmetrical triangle pattern. This comes following a strong decline in prices previously.
Oil prices could be seen breaking out in either direction. To the upside, the unfilled gap at $75.00 is the most likely target. However, for this to occur, the markets need to be convinced. The OPEC meeting due later this year could be the main catalyst. Alternately, to the downside a breakdown below 41.62 support could send oil prices posting fresh lows as a bearish pennant pattern will signal strong declines to come.
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.