The first quarter of 2017 passed off without any major events, despite some moments when the markets were on the edge. For example, early March, the Dutch elections posed a major short term threat to the markets, but the elections passed off without posing any major upsets. The FOMC also hiked rates in the first quarter of the year which was well communicated, leading to the markets managing to maintain the gains.
As we head into the second quarter of the year, here’s a quick look at the top 5 currency pairs that we expect will be the most predictable.
#1. GoldGold prices bounced off the support at 1160 – 1143 as mentioned in the previous quarterly report. Price action pushed gold prices to a three-month of 1263.73. In March, prices closed with a long legged doji indicating indecision among traders. In the near term, the bias is increasing to the downside as we expect to see a decline back towards 1215 and potentially lower towards 1160 – 1143. However, in the medium term, gold prices are expected to push higher topush higher towards 1300 – 1320 where resistance was established.
Note the descending wedge pattern that is forming, which will indicate an upside bounce following a test of support at 1160 – 1143 support level. On the fundamental level, gold prices will be supported by the political risks from the French elections in April and May. Therefore look to sell gold at the current levels targeting 1160 – 1143, and look to buy gold from this support level targeting 1215 and 1300
#2. NZDUSDThe NZDUSD was largely mixed during the first quarter as price briefly retraced back to 0.7200 in January this year. However, the bearish bias has sent prices lower in the subsequent months. We continue to maintain the bearish bias in NZDUSD with a downside target towards 0.6800. However bear in mind that support will most likely be a touch and go as we expect to see prices well supported near this previously established support level.
In the longer term horizon, NZDUSD will remain range bound within 0.7200 and 0.6800 levels. This view is validated by the fact that the monthly Stochastics oscillator is showing a hidden bullish divergence and thus, a test of 0.6800 will trigger a strong upside.
For the month ahead, NZDUSD will be biased to the downside with 0.6800 playing a key role.
#3. EURUSDEURUSD is another currency pair to focus in the second quarter of the year. Considering the fact that the French elections are due on late April and then again in early May, the common currency will no doubt come under pressure. The weekly chart time frame for EURUSD showed that while there is a near term downside in prices, we can expect EURUSD to post a strong rally, likely testing 1.1000 resistance level.
However, traders should bear in mind that the price action in March has closed in a bearish engulfing pattern. We can therefore expect a near term decline to the downside at the support level that is seen at 1.0600 – 1.05540. The common currency could then post a reversal off this level which will initially target 1.1000 and a break out above this level will signal a move towards 1.1200 in the coming months or by the next quarter.
#4. WTI Crude OilCrude oil prices will see a busy second quarter this year as the OPEC meeting in May will be critical for the markets. It is now common knowledge that despite efforts from OPEC nations to stabilize oil prices, there hasn’t been much of an impact as the supply gap was filled by non-OPEC shale oil producers.
Therefore there is a strong chance that OPEC leaders will extend the production cut agreements to the end of the year. This could potentially bode well for oil prices, but the technical chart shows that there is an increasing risk that a break down below the current support at 50.25 – 47.70 will see oil prices extend the declines towards the $40 a barrel level.
While this is the case in the next three months, traders should bear in mind that oil prices are consolidating into a triangle pattern with the potential upside breakout. Therefore, wait for oil prices to dip and buy around the $40 – $39 handle targeting $50 and $75.
#5. AUDJPYAUDJPY is looking bearish over the next quarter with the downside bias supported by the hidden bearish divergence with prices posting a lower high and the Stochastics posting a higher high. The bearish close in March is likely to see a decline in prices towards 79.73 – 79.00 support level. This will mark a correction in prices and will also set up AUDJPY for a longer term move to the upside.
AUDJPY biased to the downside. Sell the correction to 79.73 – 79.00
Therefore, in the coming months expect AUDJPY to push lower, making short positions ideal as price will target 79.73 – 79.00 support level. The decline in AUDJPY will be coming on a stronger yen in what could potentially be a risk off sentiment in the markets.
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.
