Forex Monthly Outlook – October 2017

The GBPUSD pair had a pretty strong month through the rebound from the dollar towards the end of the month took away some of the sheens of the bullish move in the pair. In the months before, the pair had been suffering due to the lack of support from the BOE and it was also seen that the UK PM May was struggling with her own party and domestic issues and there was a lot of uncertainty surrounding the pound and how it will be able to come up with all these. But over the course of September, we saw the BOE giving a lot of support to the pound and May also managed to get her house in order and focus on Brexit and this helped the pound to rise.

GBPUSD Faces Tough Times

The BOE declared that they are ready to act as and when it is necessary and they also said that the uncertainty over Brexit would not be used as an excuse in case they decide to hike rates. This raised the possibility that the BOE would hike rates later in the year and helped the GBPUSD pair to move higher. Also, May was able to get the necessary approvals in Parliament for the Brexit process and this boosted the pound even further as it broke through 1.36. But this move was tempered by the rebound of the dollar towards the end of the month.

We believe that in the upcoming month, we are likely to see the dollar continue its rebound and this is likely to weigh on the pound in the medium term. Unless the BOE tries to counter it by being hawkish and continuing its signaling for a rate hike later, we could see the pound continue to weaken through the month. May had also declared that the Brexit process is likely to take 2 more years and this has also been a setback for the pound bulls. Expect some weak consolidation in the month of October where strong data from the US is expected to keep the pound weak.

USDJPY spent most of the month of September in consolidation mode. The Threats from North Korea helped the yen to become stronger but the effect of that did not last too long and eventually, we saw the pair move higher towards the end of the month. The stock markets around the world have also shrugged off the risks and have moved higher which has also helped to weaken the yen in the short and medium term.

USDJPY Likely in Uptrend

We expect the USDJPY to continue to strengthen in the months ahead. We are seeing some clear signals of consolidation and a general build-up of strength in the pair and we believe that this pair is likely to move in a large manner in the coming months. It has been consolidating within a tight range but the consolidation has been bullish. We expect the dollar to rebound and strengthen in the coming weeks due to improving data and a possibility of a rate hike in December and this is likely to help the pair to move higher. Also, we expect the yen to remain weak as the stock markets would move in a bullish cycle and it would be safe to predict that the pair might reach 118 in the coming weeks.

The AUDUSD pair had a weak month in September as it was affected by the weak commodity prices and also a tough RBA who predicted a slowdown in the Australian economy during the course of the month. This weighed on the AUDUSD pair during the month and it ended the month at its lows.

AUDUSD Expected to Suffer

Looking ahead to the new month of October, we are likely to see further weakening. The pair has been trying to break through the highs of the range for the past 3 months and it has been unable to do so and with the dollar likely to strengthen in the coming weeks, the pair is likely to have a tough time in the month ahead. Right now, it is in a strong support region but if and when it breaks down through the 0.77 region, we are likely to see the pair move much lower towards 0.75 and below.

The gold prices are also set to become weak in the coming weeks which is going to put the pair under even more pressure.