AUD/USD EUR/USD Weekly Forecast 24 Jun 19


As cautioned in the previous forecasts, we are in a phase of highly sentimental price action. This is not conducive for forex trading as sentiment can change fast without much warning. The frequent whipsawing of the currency pairs may wipe out retail forex accounts that are excessively risked.

AUD/USD Technical Analysis

Looking at the weekly chart above, we observe a return of bullish pressure after the prior week of US dollar strength. It is important to understand that despite the bullish return, the AUD/USD remains under 0.7. This is indicative of a weak Australian Dollar sentiment.

From a technical point of view, the bearish trend is still possible. The lower bollinger band, 0.68 and 0.7 will be major support and resistance regions in the week ahead.

EUR/USD Technical Analysis

Looking at the weekly chart above, we observe a similar return of bullish pressure after the prior week of US dollar strength. Unlike the Australian Dollar, the bullish momentum for the Euro currency is significant. Cutting across the 1.13 region and middle bollinger band, it appears to be targeting the major technical and sentimental region of 1.14. This suggests that the positive sentiment towards the Euro currency is sizable.

In the week ahead, we need to monitor closely and pay attention to the price action in the shorter time frames. A continuation of the momentum will likely attempt to gain a foothold above 1.14. Failure to do so will open up the middle bollinger band, 1.13 and 1.12 as supports.

US Federal Reserve Edges Towards A Cut

The week brought more dovish developments, signaling that an interest rate cut may be just around the corner. An official was reported to have pushed for a 0.5% cut during the June meeting. Another Fed official voted against keeping the interest rate steady as he wanted to achieve an insurance against weakness in the economy. Despite good growth and low unemployment, inflation remained low.

Low inflation is a cause for concern for Fed officials as it may be indicative that the economy remains soft. Inflation usually comes with increased economic activities which drive prices up. Therefore an absence of it may suggest that businesses remain cautious, holding back on expansion.

A number of analysts are forecasting multiple interest rate cuts for the reminder of the year. If this materializes, the US Dollar will likely weaken further as demand usually favors a currency with a higher interest rate.

Geo Political Apprehension

Besides the continuing trade wars of the US and the Brexit impasse, a potential flash point is developing in the middle east. Tensions between the US and Iran have gone up a notch in recent days. With the bombing of oil tankers and the downing of an US drone by Iran, the US President had ordered a military strike, only to recall it minutes before the execution. Investors do not look upon such geo political challenges with favor as any detrimental development may send the financial market to a crashing drop. Risk aversion may be increasing as suggested in this chart of the price of gold.

Increasing gold price

For the week of 14 Jun 19, gold closed at almost $1400. We also see a bullish momentum since early May. Gold is considered by many a timeless currency and hence a “safe” asset. Therefore an increase in it’s demand is suggestive of risk aversion.

The Week Ahead

We are likely to see continued  influence by sentiment on the price action. It is imperative that one trades without risking excessively. Here are a number of important economic events.

AUS RBA Gov Lowe Speech
Speeches may contain a question and answer segment that at times go into unscripted topics and result in unexpected developments and volatility.

EUR German Ifo Business Climate
Business Climate surveys are influential as the sentiment of businesses is a leading indicator of economic health. A healthy sentiment suggests that an economy is moving along well while a cautious sentiment may see less business activities due to prudence.

AUS RBA Assist Gov Bullock Speech
Speeches may contain a question and answer segment that at times go into unscripted topics and result in unexpected developments and volatility.

OPEC Meetings
The Organization of the Petroleum Exporting Countries is an intergovernmental organization of 14 nations.

USA FOMC Member Williams Speech
Speeches may contain a question and answer segment that at times go into unscripted topics and result in unexpected developments and volatility.

USA CB Consumer Confidence
Consumer surveys are influential as the sentiment of consumers is a leading indicator of economic health. A healthy sentiment suggests that an economy is moving along well and hence consumers are confident. This likely leads to increased retail sales. A cautious sentiment on the other hand may see consumers spend less in view of a perceived upcoming economic crisis.

USA Richmond Manufacturing Index
This survey of manufacturers is important as the sentiment of businesses is a leading indicator of economic health. A healthy sentiment suggests that an economy is moving along well and with the activities of the businesses, downstream benefits will happen such as employment and investment.

USA Fed Chair Powell Speech
USA FOMC Member Bullard Speech
Speeches may contain a question and answer segment that at times go into unscripted topics and result in unexpected developments and volatility.

USA Core Durable Goods Orders
USA Durable Goods Orders
Reports on the orders of goods are leading indicators of production and thus the level of economic activities. Increasing purchase orders suggests that manufacturers will increase activity to meet the demand, providing downstream benefits such as employment. On the other hand, decreasing orders may indicate an upcoming economic crunch.

EUR German Preliminary CPI
Consumer Price Index is important because the price of consumer goods is a significant component of inflation. If inflation is high, a central bank may increase interest rate to mitigate the situation.

USA Final GDP
Gross domestic product is a measure of the monetary market value of all the goods and services produced. It is an overall measure of economic activity and health.

G20 Meetings
The G20 is an international forum for the governments and central bank governors from 19 countries and the European Union. US President Trump is expected to meet with President Xi of China to discuss the trade challenges.

EUR CPI Flash Estimate
EUR Core CPI Flash Estimate
Consumer Price Index is important because the price of consumer goods is a significant component of inflation. If inflation is high, a central bank may increase interest rate to mitigate the situation.

USA Core PCE Price Index
While the Personal Consumption Expenditures index is similar to Consumer Price Index, it focuses on individuals. It is a component of inflation and if inflation is high, a central bank may increase interest rate to mitigate the situation.

USA Personal Spending
While Personal Spending is similar to Retail Sales, it focuses on consumers. It is a fundamental component of the economy because as consumers spend, it translates to revenue and flows up stream as salaries, wholesales purchase, production orders and so on.

USA Chicago PMI
PMI or Purchasing Managers’ Index is a survey of purchasing managers and is important as the sentiment of purchasing managers is a leading indicator of economic health. A healthy sentiment suggests that an economy is moving along well while a cautious sentiment may see less business activities due to prudence.

USA Revised UoM Consumer Sentiment
Consumer surveys are influential as the sentiment of consumers is a leading indicator of economic health. A healthy sentiment suggests that an economy is moving along well and hence consumers are confident. This likely leads to increased retail sales. A cautious sentiment on the other hand may see consumers spend less in view of a perceived upcoming economic crisis.

There are many more events and hence it is important to follow an economic calendar. By doing so, you can reduce the possibility of an unexpected development affecting your trading plan.

Members can log in to their dashboards for an economic calendar. The latest premium analysis and our popular Price Action Bias Signals are now available too.

You can also head to our latest feature, the Economic Fundamentals Center for information on the current interest rates and unemployment rates of the countries covered in our analysis of currency pairs.

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Traders should always practice proper money management and seek to understand the underlying tones for the market.

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