The world of forex has had a somewhat subdued year in 2015, with most of the market’s attention being placed on only a few currencies. This ultimately shows that the market is focusing on central bank policy rather than external market events, and this creates some interesting trading implications for 2016.
Most of the opportunities are likely to center around the EUR/USD currency pair, as there is diverging monetary policy issues that could create a discernible trajectory for what is most likely to happen going forward.
By FiboGroup
Fed Ready to Implemented Changes
On the US side of the equation, forex traders will need to contend with the fact that the Federal Reserve is already somewhat behind in terms of where it should be in its monetary policy tightening cycle. The Fed originally intended to raise rates in 2015 but extreme volatility in the stock markets during the summer months tied the hands of the Fed’s voting members and made it very difficult to act on its true policy intentions.
In the Eurozone, the opposite is now seen. Most of the central bank commentary has suggested that we will actually see some sort of quantitative easing program implement before the end of next year. These programs would be designed to reduce the chronic unemployment levels that are seen in several countries and make it easier for export markets to generate profits and revenue.
With these two balancing factors, we are likely to encounter a strong trading range in the EUR/USD in 2016. To the downside, many traders will continue to be focused on the prospects for parity as the pair is now within reach of the closely watched 1.00 level. Of course, this would be uncharted territory for the pair and this would make technical analysis strategies much more difficult to implemented going forward. On the topside, most of the bullish activity is likely to be halted by the 1.10 level. There is a strong possibility that we will be trading above this area at some points next year, but any bullish breaks above this level are likely to be met by selling pressure from traders that are looking to buy the Dollar on the cheap.
So for forex traders that are looking for a broad way of trading the EUR/USD over the next six months, this is a trading range that is likely to bring in some excellent trading opportunities with relatively low risk. Keep these factors in mind when forex trading over the next few months.