Analysis and outlook for 2017

A Technical Preview, Major Currency, Pairs, 2017, Technical Analysis, fx trader, forex EURUSD-MONTH

Chart A: EUR/USD, Source: Admiral Markets

I’m expecting a continuation of the USD uptrend in 2017. Looking at Chart A, you can see that the two-year consolidation zone (green lines) has moved sideways after strong bearish momentum (dark red arrow). Furthermore, I’m expecting a break of support and a continuation of the EUR/USD downtrend. The flat flag formation is a typical continuation pattern, especially since bearish momentum before the flat zone was strong - and hence price should usually break to the downside.

USD strength should be backed by the fundamentals that indicate a weak euro as the European Central Bank continues with its QE programme. This is compounded by bank sector problems and weak eurozone growth. The Federal Reserve has also just raised interest rates to 0.75%, with further hikes anticipated in 2017 due to President-elect Trump’s inflationary policies. 

How deep EUR/USD will fall depends on how price breaks below the consolidation zone: strong momentum (red arrows) could see a challenge of previous bottoms (dark blue box), but choppy price movement during a bearish breakout (orange dotted arrow) could mean that price bounces at a 0.95-1.00 support level with volatile swings up and down for the remainder of 2017, depending on the major events (e.g. Brexit and Article 50, Trump’s first 100 days, further interest rate decisions from the Fed, potential lifting of sanctions on Russia, along with elections in France and Germany).

A Technical Preview, Major Currency, Pairs, 2017, Technical Analysis, fx trader, forex GBPUSD-MONTH

Chart B: GBP/USD, Source: Admiral Markets

USD strength should prevail against GBP too (Chart B). I would expect one more lower-low on the GBP/USD. Price seems to be correcting at the moment in a bullish channel, or perhaps a rising wedge chart pattern (green lines). I am expecting the previous sideways zone to act as a resistance (dark red), which is aligned with Fibonacci levels and a long-term downtrend resistance line (red).  A breakout below the channel (green) should see the Cable retest the bottom (orange arrow). A break below the bottom should see the price post one more lower-low and fall towards the Fibonacci targets (dotted orange arrows). After that, I do think the GBP/USD downtrend could eventually be completed and a return or retracement back to the mean would be likely (blue arrows). Of course, the Cable price movement remains dependent on news regarding Brexit.

A Technical Preview, Major Currency, Pairs, 2017, Technical Analysis, fx trader, forex USDJPY-MONTH

Chart C: USD/JPY, Source: Admiral Markets

JPY looks weak and I am expecting the USD/JPY to continue with an uptrend during 2017. Occasionally light and shallow pullbacks should be visible, but price typically never retraces very deep once JPY is trending. Hence the USD/JPY should keep pushing higher once those bull flag chart patterns break. That’s why I’m expecting a higher-high on the USD/JPY in 2017.

Chris Svorcik
Forex Educator
Admiral Markets