AUD/USD Weekly Forecast 10 Dec 18

Good day forex traders.

Welcome to the weekly review for AUD/USD.

In the previous AUD/USD forecast we noted that the currency pair was bullish for the week. We were at levels last seen a fortnight ago. The middle bollinger band remained pressured.

Looking at the AUD/USD weekly chart above we noted that the currency pair was bearish for the week despite a surge towards 0.74.

It is now testing the resistance turned support level of 0.72. Last week we mentioned that a bullish momentum might happen if the middle bollinger band is clearly breached. This has failed to materialise and hence we cannot ignore the possibility of bearish undertones.

The upcoming week is crucial as 0.72 needs to be breached decisively before the Jan 18 bearish channel can resume.

Weak Economic Outlook

Investors are increasingly concerned about the economic outlook of Australia. The flow of the Australian currency came in worst than expected. It was a -10.7b instead of the expected -10.2B. A surplus means the stated currency is being bought for transaction. -10.7b is a deficit.
Australian Gross Domestic Product is also weaker than expected. Coming in at 0.3% instead of the forecasted 0.6%. As GDP is an important measure of economic health, disappointing data may dampen sentiments.
The Reserve Bank of Australia Deputy Governor Guy Debelle cautioned that interest rates ‘can still move lower’. It was noted that falling home prices may magnify the slump in the housing market. There are opinions that the RBA is preparing for the possibility of a further drop in the value of the Aussie Dollar.

US Non-Farm Payroll Disappoints

The US Non-Farm Payroll came in worst than expected. The forecast was 200,000 but 155,000 jobs were added last month instead. Apprehension increased as investors ponder the possibility that the US Federal Reserve may not go ahead with the plan for 3 rate hikes next year. A currency with high interest rate is usually sought after. Members can log in to their private dashboards for the latest US NFP analysis to see how the US dollar reacted.

All About The Interest Rate

Assuming all things being equal, the expected interest rate trajectory of a currency vs another will often influence the momentum. The US dollar has passed the bottom and the US Federal Reserve is in the process of tightening up. The Australian dollar is still not out of the woods and the Reserve Bank of Australia remains open for further easing. Investors usually demand a currency with higher interest rate and hence a currency that has high interest or is on a rising trajectory will often get more demand.

The week ahead is crucial. We have important economic data releases such as US producer price index, US consumer price index and US retail sales. Having proper money management is important.

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