Forex Forecast: Trade Deal to Get Currencies Through the Holiday

NEW YORK, NY – It’s going to be another short week for traders as the year comes to an end. But despite the thin holiday volume, currency pairs will likely get support from the optimism still being generated by the promised US-China trade deal.

With the New Year break coming in a few days, investors will be looking at below average trading volumes. However, they will be higher than this past week’s numbers so there is a chance of increased volatility.

The last quarter of this year (and of the decade) saw the pound enjoying its best performance. It even advanced 6.6% against the US dollar. However, the pound sterling seesawed last week over renewed fears of a no-Brexit deal. The currency was able to recover though, and this will likely continue in the coming days.

Traders are predicting that it will be a “buy on the dips” kind of week as far as the GBP/USD is concerned. The pair’s 1.30 level will attract more buyers. The pair might also settle between 1.35 and 1.30.

The Euro had a strong rally on Dec. 27. It has resulted in a bullish candlestick for the week ahead. But with the volume expected to be on the low side next week, it’s not good to rely on the candlestick.

The EUR/USD is at the 1.12 handle and traders will likely look towards a 1.14 handle if the pair inches up. Some experts are expecting a selloff and for the currency to drop to the 1.11 handle. It’s not a bad number and is considered fair value in the present market.

The past week also saw the Australian dollar making headway. It broke above the 61.8 Fibonacci retracement and is expected to be near to an upside move. The AUD/USD pair’s upward trend is expected to last long, particularly if China and the US finally sign an agreement.

The AUD is especially sensitive to the trade deal situation, so if things improve on that front, so much the better for this currency.

The US-China trade deal is keeping investors hopeful for the future. Last week’s minimal news and the lack of details from the agreement is starting to get some traders worried, but not enough to turn to safe-haven Yen.

The USD/JPY pair was at 109.464 last week. It gained 0.01% and is up by 0.0008. While it was at a higher level last week, the low trade volume prevented it from making any significant movement in any direction.