Fourth Quarter Fundamental Forex Outlook

Taking a look at the upcoming final quarter of the year, Forex and financial traders, in general, will admit that we have closed out one of the most subdued and quiet quarter in recent memory. However, it is safe to reason that this quiet consolidative mode in the Forex and other financial markets is not likely to continue. There is some increasing fundamental pressure as well as certain markets taxing technical boundaries across a plethora of markets. It is a matter of time before a catalyst emerges to make things explode in one direction or another.

US Dollar Forecast

The third quarter saw an extreme period of subdued activity for the Dollar Forex crosses. Nothing as quiet as this has been seen in the last decade or so. There has been narrow trading ranges in a number of Dollar crosses, but underlying tension should increase in the final and fourth quarter of 2016.

Euro Dollar Forecast

Let’s be blunt, the year started out on a whimper with the EUR/USD Forex market. However, as we now head into Q4 2016, we could end up with some pretty decent volatility. The Forex market has weathered some decent storms over the summer, including the Brexit vote and trader speculation over the next Federal Reserve rate hike. The EUR/USD was pretty quiet in the final week of the third quarter but with a looming Fed rate hike in December, Brexit news crossing the wires and the European Central Bank assessing the effectiveness of their quantitative easing (QE) program, this could change before the end of the year.

British Pound Forecast

For now, with the Brexit ramifications still being gauged, the British Pound, especially the GBP/USD remains tilted to the downside. The United Kingdom has yet to enact Article 50 proceedings to start the final divorce from the European Union (EU) but this bearish tone could lessen somewhat as the Bank of England (BOE) takes a wait and see approach towards its monetary policy.

Japanese Yen Forecast

The Japanese yen has been gaining, especially against the US Dollar. This trend, especially in the USD/JPY, is likely to favor a stronger yen going into the end of the year. Investors are still losing what confidence they have in the Bank of Japan to kick start their sluggish economy and zero inflation growth. Investors have little faith in the negative interest rate policy and this Forex market has been trading near multi-year highs. However, with a looming Federal Reserve move with interest rates on the near horizon, there could still be a reversal of course with the USD/JPY challenging the ¥100 level once again.