AUD/USD Weekly Forecast 28 Apr 19


In the previous weekly review, we noted that the AUD/USD was bearish for the week. The middle bollinger band capped the progress of the momentum and in the upcoming week, we might see the strong sentiment and support region of 0.7 standing in the way of any bearish effort. We went through a period of bullish momentum during the earlier part of the week due to better than expected numbers released by China. As China has an extensive trading relationship with Australia, this contributed to the initial bull run.

aud usd forecast

AUD/USD Technical Analysis

Looking at the AUD/USD weekly chart above, we see a bearish drive to breach the strong sentiment and technical support of 0.7. The currency pair has since eased back above the 0.7 line. In our previous review, we had foreseen this scenario as 0.7 is a major region.

In the upcoming week, we need to drop down to shorter timeframe to monitor the price action. A repeated bearish attempt to breach 0.7 may carry more momentum as the AUD/USD repeatedly chips away at any long positions held by traders. This is clearly visible as circled in the chart.

If a bullish recovery surfaces, we expect the sentiment and resistance region of 0.71 and the middle bollinger band to offer obstruction. 0.72 will then be the next extended resistance.

All About The Rate

The Australian dollar took a beating this week as speculation of a rate cut increased. This is especially after the weaker than expected Consumer Price Index. CPI or 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. It came in at 0% versus the expected 0.2%, triggering negative sentiment. A high interest usually generates demand while a low interest may result in dumping of the currency for better yielding alternatives.

Import Pricing Disappoints Too

Towards the end of the week, the Import Price Index was released. It was much weaker than expected, coming in at -0.5% instead of the expected 0.4%. As import prices contribute to inflation, this dismay result would had likely added to the initial negative sentiment generated by the Consumer Price Index.

Shimmer In The Dark From The USA

In our EUR/USD pulse check, we mentioned that risk aversion may be at work as the US housing data was disappointing and that the President of the USA mentioned that he would not renew Iranian oil waivers. During such periods, assets deemed as “safe” such as the US dollar will be sought after. This usually results in the increase of value of the US dollar.

However towards the end of the week, the US Advance GDP turned out to be much better than expected. It was announced to be 3.2% instead of the expected 2.2%. Considering that 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. Therefore this positive result probably eased the risk aversion and resulted in the late week recovery seen in a number of currency pairs, including the AUD/USD as traders sought out riskier assets.

The Week Ahead

USA Core Personal Consumption Expenditures Price Index
USA Personal Spending

Personal pricing 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. Personal spending is a fundamental component of the economy. As consumers spend, it translates to revenue and flows up stream as salaries, wholesales purchase, production orders and so on.

CNY Manufacturing PMI
CNY Non-Manufacturing PMI

Surveys of purchasing managers are 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 Employment Cost Index
Employment cost is a leading indicator of inflation. If cost rises, the increase is reflected downstream in the price of production and products. If inflation is high, a central bank may increase interest rate to mitigate the situation.

USA Chicago PMI
Surveys of purchasing managers are 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 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 looming economic crisis.

USA ADP Non-Farm Employment Change
Employment is a fundamental component of the economy as it leads to consumer spending and hence retail sales. A low unemployment rate is an indicator of a healthy functioning economy. ADP NFE Change is used by a number of analyst as a precursor of the US NFP.

USA ISM Manufacturing PMI
Surveys of purchasing managers are 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 FOMC Statement
Interest rate related statements are given much attention by analysts and investors as it has a direct impact on the currency. Investors usually favor a currency with a higher interest rate and will analyse these statements thoroughly for insights on the interest rate policy.

USA Federal Funds Rate
A high interest usually generates demand while a low interest may result in dumping of the currency for better yielding alternatives. Therefore the interest rate result usually has a significant impact, especially when it is an unexpected result.

USA FOMC Press Conference
Press conferences often go into unscripted territory during the Question and Answer segment and hence may spur unexpected developments and volatility.

CNY Caixin Manufacturing PMI
Surveys of purchasing managers are 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.

AUS Building Approvals
The construction of a building generates many economic activities. Jobs will be created for construction workers, the various sub contractors and services associated with new buildings such as power, water, furniture and so on. Therefore this result is closely monitored.

USA Average Hourly Earnings
Employment cost is a leading indicator of inflation. If cost rises, the increase is reflected downstream in the price of production and products. If inflation is high, a central bank may increase interest rate to mitigate the situation.

USA Non-Farm Employment Change
USA Unemployment Rate

Employment is a fundamental component of the economy as it leads to consumer spending and hence retail sales. A low unemployment rate is an indicator of a healthy functioning economy. The US NFP often produces significant price volatility due to the importance of it.

USA ISM Non-Manufacturing PMI
Surveys of purchasing managers are 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.

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.

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

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