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Main » 2016 » February » 22 » Forex forecast for the week 02/22/2016 - 02/26/2016: Euro and precious metals are retreating, lb. position does not hand over!
Forex forecast for the week 02/22/2016 - 02/26/2016: Euro and precious metals are retreating, lb. position does not hand over!

The results of the past period and the prospects for price developments in the euro / dollar.

Price dynamics of the euro / dollar in the last week largely consistent with our expectations, although it has made some adjustments.



The forecast assumed completion of corrective pullback in the pair price zone 1.1265 ÷ 1.1320, and then turn the course of the single European currency to decline to set target levels.


However, after a little hesitation in the narrow sideways range trading at the opening of the weekly course pairs continued the previous decline, the driver of which was the performance of the ECB Mario Draghi to the European Parliament's Economic Affairs Committee.

His statement that the ECB will start to accept as collateral for non-performing debts of regional banks disappointed the market and has knocked down the course of the single European currency - the quotations resumed active decline.

Another negative driver for the euro began rising oil prices that returned investor interest in risky assets and the stock market. In addition, expectations of the publication of the January Fed meeting minutes continued to keep the euro under "bearish" pressure.

Despite the recent "soft" speech of Fed Chairman Janet Yellen, US economic indicators looked pretty well and justify further interest rate increase. Against this backdrop, the dollar and higher-yielding riskier assets were in priority, which led to the breakdown of the euro key support levels of 1.12 and 1.11, as well as the testing of the new 3-week low of 1.1066.

Thus, at the end of the week rate of EUR / USD failed to generate the expected short-term pullback, but realized almost all the targets to reduce our forecast.



Fundamental factors.


The economic calendar next week is scheduled to be published quite a number of US reports. They include data on business activity in the industrial sector and the service sector, a report on new home sales, data on personal income and expenditure.

However, special attention should be paid to traders data on durable goods orders and refined performance in terms of growth of the economy in the 4th quarter of last year.

In the current environment, any signs of the cooling of the US economy will reinforce fears of a tightening of a pause in the process of further interest rate increases.

Thus even a small doubt in the stability of the US economy will lead to yet another fall in the dollar, investors flee from risky assets and the growth of the single European currency.


The technical picture.

On December 3 last year, the euro / dollar is forming a new upward trend, in which couples exchange rate was on the rise more than 800 points.

Currently, the course of the single European currency adjusted.

On the downward pullback from 1.1375 high reached sellers were unable to overcome the resistance of the "bulls" on line 233-day moving average. The fall of the pair stopped, and at the base of reducing the combination of topping candlestick patterns "Rickshaw" and "Hammer", signaling the "bull" turn the single European currency was established.

At the end of trading week closing level was below the pair a week, but significantly above the daily pivot points, which indicates the completion of the previous downward trend and turn the course of the single European currency to rise.

Daily indicators also confirmed the imminent movement, demonstrating a reversal indicator «Stochastic» from the oversold zone on the rise. On the resumption of lifting the pair warned us and wave structure of the pair.

The same conclusion can be drawn from the analysis of the Commodity Futures Trading Commission report last week, which once again showed a decrease in the total "net" positions on the euro and the strengthening of sales on the market, "bullish" sentiment that currency.

Similar signals we have received also from the balance sheet in trading volume indicator.

Demand Indicator (it is so called) on the daily timeframe began to unfold on the rise, indicating an increase in market interest in buying the single European currency.

Considering all these factors, in our forecast for next week suggest a short-term decrease in pair price zone 1.1070 ÷ 1.1034, and then be followed by a reversal of the course of the single European currency to rise to the following target levels: 1.1112,1.1150, 1.12, 1.1216, 1.1248, 1.1277, 1.13 and up to the previous local maximum of 1.1376.

After the lifting we expect a reversal of the course of the single European currency in the correctional decline.

The pair GBP / USD forecast for the week.

Our previous forecast assumed an initial short-term decrease in pair, and then turn the British currency to rise to the established target levels.

However, the forecast had warned that if the breakdown of the top of the key resistance level of 1.46 will not take place, then the quotation of the currency pair will unfold to reduce to the key support level of 1.45, 1.44 and 1.43.

The actual dynamics of the pair demonstrated exactly this prediction option. After opening the trading week the pair tried to continue the course of the restoration, but after climbing to just 45 points was stopped on the background of strengthening the dollar across the spectrum of the currency market.

The driver of the subsequent reduction in the publication record of weak consumer inflation data in January of this year.

The market reacted to the negative indicators of aggressive selling pounds, a course in which a collapse tested weekly low at around 1.4234.

The situation was only thanks to defuse the results of the next survey on the possible withdrawal of Britain from the European Union structure. It is known that most of the population tends to preserve the membership in the EU. In addition, European Commission President Jean-Claude Juncker said he was confident in a positive agreement on the problems of relations between the UK and the EU. That reassured investors and stop the decline of the national currency.

Additional support for the "bulls" on the pound has had a strong publication in the UK labor market and employment data that showed reduction in the number of unemployed and the growth of the average wage.

In addition, it increased sharply and retail sales for January. Against this backdrop, demand for British currency also began to grow, resulting in a pair of the course by the end of the week rose by 160 points and recorded a closing price of trading on the key level of 1.44

Fundamental factors.

The British currency in the last few weeks has restored its position, but the change in the market sentiment did not happen and as a whole the price movement of the pair and has not gone beyond the sluggish current correction.

However, on Saturday morning, it was reported that British Prime Minister David Cameron introduced Cabinet agreement reached them about the special status of the United Kingdom in the European Union. According to the Prime Minister, the agreement will allow the country to take full advantage of the EU to remain a strong and prosperous state, but it does not participate in the processes that it would take for themselves harmful, including the issue of migrants, open borders and the provision of financial assistance to ravage the regional banks in Europe.

Taking into account the possible reaction of the market on this agreement, we expect a significant reduction in the "bearish" pressure on the British currency and the appreciation of the pair GBP / USD.

Technical factors.

Since the middle of last week, after a brief reduction of GBP / USD turned into a new stage of corrective recovery couples. However, the initial stage of correction of moderate price movement and limited growth of pair within the limits of the rising channel. Similar dynamics was related to the holding of the summit Espoo issue of possible British exit from the European Union and the uncertainty of the expected results.

Under these conditions, the closing price of the pair for the week was higher than the weekly and daily pivot points that indicated the strengthening of the upward momentum in the price movement of the currency.

Technical indicators are almost all timeframes confirmed the upward trend couples and «Stochastic» on the daily timeframe left the oversold zone and started to grow.

In addition, the reduction in the basis of the pair on the daily timeframe characteristic candlestick patterns formed "doji", warned us about the turn of the price movement of the pair on the rise.

The wave structure of the price movement of the pair has also warned us about the resumption of growth.

In turn, last week showed another decline in total "clean" position report Commodity Futures Trading Commission to sell the pound, which also indicates the continuation of the growth of "bullish" sentiment towards the UK currency.

This is also evidenced by the increase in trading volumes on these balance volume indicator.

Thus, the overall technical picture for this pair is beginning to change. Low price levels and oversold currency hold the "bears" from the new sales and fundamental factors (positive economic statistics and the EU agreement with the United Kingdom) to advocate "bullish" recovery couples.

Considering all the above, in our forecast for next week suggest a continuation of the correction and restoration of pairs of lifting the British currency to the price levels 1.4470, 1.45, 1.4520, 1.4565, 1.46.

If the "bulls" on the pound will be able to push the pair above this level and to gain a foothold above it, in this case, followed by a further rise in the price levels of 1.4632, 1.4667 and 1.4737.

If the breakdown level of 1.46 will not take place, then the quote currency unfold to reduce to the key support level of 1.45, 1.44 and 1.43.

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