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AUD/USD Forecast 22 Jul 19

In recent times, there seems to be a gradual change in sentiments. You can especially see this in play over the long term weekly chart below.

The bearish trend from 2018 seems to have taken a back seat for now. We are now at a crucial region.

Technical Analysis

Looking at the weekly chart above, it is obvious that the region of 0.7050 functions as a major support and resistance line. With the AUD/USD testing it at the moment, a clean decisive break above 0.7050 may encourage bullish momentum. This may then place the currency pair back to the region of 0.7 to 0.72.

A failure of the AUD/USD to breach 0.7050 will likely see the currency pair receive bearish pressure. This may suggest a return to the 0.68 to 0.7 region.

Fundamental Analysis

The employment data for Australia was released during the week. While it came in with a slight disappointment, the unemployment rate remains flat. It was reported that the market finds the situation acceptable thus it is probable that minimal negative sentiment was inflicted upon the Australian dollar.

The US dollar is currently facing increasing bearish pressure due to the shift of monetary stance by the US Federal Reserve. It seems to be not too long ago that interest rates were hiked. It was followed by a pause and in recent times, the perception had changed to one of easing and interest rate cuts.

While the equity market will likely benefit from an easing financial climate, the US dollar value will likely face pressure due to the weaken demand. Investors are usually attracted by assets with higher interest rates. If the US Federal Reserve officials give further perception that a significant interest rate cut regime will happen, it likely that the US dollar value drops further.

Week Ahead

We have RBA officials due for speeches next week. Speeches may contain a question and answer segment that at times go into unscripted topics and result in unexpected developments and volatility.

There are also important US economic data to be released. Durable Goods Orders and advance GDP are among the data to be released.

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.

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.

It is important to monitor the sentiments and make adjustments when necessary. 

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.

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