Forex Trading Signals: EURUSD October-November 2017

■ Market: Foreign Exchange

■ Asset: EURUSD

It seems the last quarter of 2017 marked a new macroeconomic era for the currencies of developed countries. This era involves a significant monetary shift toward the start of a global economic 'tapering.' First, let’s review our previous Forex trading signal.

---

Evaluating Our Previous Trading Signal

In our previous trading signal (August 2017), we forecasted a bearish US Dollar market, stating: “The USDX trend is clearly bearish. The key support area for USDX is NOT close. Currently, USDX trades at 95.48, and the support zone starts at 90.80 (S1).” Indeed, the US Dollar Index quickly dropped from 95.48 to below 91.00, finding support around 90.95 points. This confirmed our previous signal.

---

EURUSD Outlook — Politics Lead, Economy Follows

Recently, the Euro climbed to 1.209, its highest level since early 2015. After the German elections and the unexpected rise of the far-right, the Euro lost some gains. A Deutsche Bank Asset Management team argues that politics now drive currencies, not the economy or interest rate differences. One thing is clear: developed countries’ currencies are more sensitive to politics than ever.

Currently, EURUSD is in a bearish trend likely to reach 1.148-1.144 (S1). However, the last month of the year is traditionally bullish for EURUSD. So, we expect the bearish trend to continue for a few weeks, followed by a strong reversal—probably in late November.

---

EURUSD Technical Analysis and TCI Chart

The following EURUSD chart (D1) includes a TCI chart for the same period (October 2015 – October 2017). The Trading Center Indicator (TCI) is a technical indicator developed by TradingCenter.

🔗 Link: » More About TCI

Chart: EURUSD (D1) and TCI Chart (2015-2017)

□ Key Support/Demand Level:

S1: 1.148-1.144 | S2: 1.109-1.110 | S3: 1.052-1.058

□ Key Resistance/Supply Level:

R1: 1.188-1.190 | R2: 1.199-1.209 | R3: 1.249-1.252

---

Macroeconomic Outlook -The Biggest US Monetary Shift since late 2015

The Federal Reserve announced that beginning in October 2017, it will start the largest monetary policy shift since the end of 2015. Notably, this decision had unanimous support from all Fed Committee members. The Fed will begin shrinking its massive $4.5 trillion balance sheet, which had expanded significantly since 2013 through large-scale bond purchases.

Instead of reinvesting proceeds from maturing bonds, the Fed will reduce its holdings by $10 billion per month initially, divided between Treasuries and Mortgage Securities. This amount is expected to rise to $20-30 billion per month in the future.

Regarding interest rates, the Fed expects inflation to stay below its 2% target at least until 2018, implying that rate increases will be gradual. According to CME interest rate probability data, the forecast for the US benchmark rate hikes is:

• 100-125 basis points by November 2017

• 125-150 basis points by December 2017 (an increase of 25 bps)

• 150-175 basis points by August or September 2018 (another 25 bps hike)

This suggests one more rate hike in 2017 and two or three hikes in 2018. The longer-term target for rates has been lowered from 3.00% to 2.75%.

---

Global Economic Overheating Spurs Global Tapering

Citi reports that global central banks’ asset purchases will shrink from the current $100 billion per month to zero by the end of 2018. Major central banks—including the Fed, ECB, Bank of England, and Bank of Japan—are all planning to reduce their asset purchases.

Following the Fed’s move, the ECB is expected to announce on October 26, 2017, a cut in its monthly net asset purchases by 5-15 billion euros starting January 2018.

One key driver behind this global tapering is the ‘overheating’ global economy. Citi projects world GDP growth of 3.1% in 2017 and 3.3% in 2018. Developed economies are forecasted to grow by 2.1% in 2017 and 2.2% in 2018, while emerging markets are expected to grow faster, at 4.5% and 4.7% respectively.

---

EURUSD Statistics (October, November, and December)

Here are the statistics for EURUSD based on 17.5 years of research by Qexpert.com and TradingCenter.org:

As mentioned earlier, December, the last month of each year, is traditionally a bullish month for EURUSD.

□ OCTOBER: -0.69% Average Returns / 7 times (↑) and 10 times (↓)

□ NOVEMBER -0.04% Average Returns / 8 times (↑) and 9 times (↓)

□ DECEMBER +1.51% Average Returns / 10 times (↑) and 7 times (↓)

 

■ Forex Trading Signals: October-November 2017

George Protonotarios, Financial Analyst, » George at Linkedin

for TradingCenter (October, 5th 2017)