Good day forex traders.
Welcome to the weekly forecast of the AUD/USD. How was your trading week? I hope it was with a harvest of pips!
In the previous AUD/USD forecast we noted that the currency pair was bullish for the week. It was above 0.72 and facing off the middle bollinger band. The currency pair had to establish itself above the middle bollinger band before we could consider that a bullish recovery is happening.
Looking at the AUD/USD weekly chart above we noted that the currency pair has breached the middle bollinger band. Next week is crucial as we seek to observe if the currency pair would remain above the middle bollinger band.
Should the AUD/USD establish itself clearly above the middle bollinger band, the next immediate bullish target will likely be 0.74.
If the bullish momentum fizzles, we expect 0.72 to be the immediate bearish target.
We previously noted that the Reserve Bank of Australia is adopting a wait and see stance for now. The state of the economy warrants no action to be taken at the moment.
The US dollar has unexpectedly weaken. This is likely due to a few factors. It is important that we understand it to get a better grasp of the market.
US Federal Reserve 2019 Outlook
It was reported that the US Federal Reserve chair Powell has indicated of a scenario where the interest rate hikes may pause in 2019 due to the possible economic challenges. Factors include external factors such as weak demand and internal factors such as reduced stimulus. I mentioned that investors usually favour a currency with a high interest rate. This possibility of a halt may have added downside pressure to the US dollar.
China Economic Resilience
While an end to the US China trade war is not in sight, there is growing sentiment that China with its massive hinterland is well positioned to ride it out. There are comments coming from the US that a deal will be achieved. This has likely fuelled general optimism and with it an appetite for risk from investors.
With the employment figures coming in better than expected, there is positive sentiment among investors that the Australian economy is doing ok. With employment comes spending and with that comes profit. Positive employment developments are always very much welcomed.
Early next week brings the release of the Monetary Policy Meeting Minutes from the Reserve Bank of Australia. This gives a look into the economic situations that led to the current interest rate policy. Thus a potential for volatility comes if any unexpected development is revealed.