AUD/USD Weekly Forecast 6 May 19


In the previous AUD/USD weekly forecast, we saw a bearish drive to go beyond the strong sentiment and technical support of 0.7. While the currency pair ended above the 0.7 line, a repeated bearish attempt to breach 0.7 might intensify as more long positions are triggered. There were speculation of an interest rate cut and worse than expected economic data. The conditions resulted in a bearish sentiment. On the other hand, the US Advance GDP turned out to be much better than expected, increasing risk appetite.
AUD USD Weekly

AUD/USD Technical Analysis

Looking at the AUD/USD weekly chart above, we note that the currency pair was bearish for the week. While the week was limited in range, the incursion below 0.7 is noteworthy as the AUD/USD also went below 0.7 in the previous week. Repeated attempts to breach the strong sentiment and support of 0.7 may weaken it leading to an eventual foothold gained below.

In the upcoming week, we need to continue monitoring the shorter time frames closely so as to ascertain the situation of the price action. Shorter time frames will result in more noise (false momentum) but will allow a more responsive understanding of the price action.

To the up side, we will likely see the middle bollinger band and 0.71 as the resistance, followed by 0.72 as an extended resistance. A continuation of the bearish momentum will need to break 0.7 before moving down towards 0.69 as the next support.

Week Of Disappointing Data

China reported weaker than expected results for the various purchasing manager surveys conducted. 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. As China is a significant trading partner of Australia, this lackluster reporting of the surveys will likely dampen sentiment towards the Australian economy and currency.

The Australian Building Approvals was worse than expected. The number of approvals for new buildings dropped -15.5% instead of the expected -12.5%. This is a more than 20% deterioration of the data. 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. With this intensified negative report, it is not a surprise that sentiment towards the Australian economy and currency has been impacted significantly. The AUD/USD is the only currency pair among those that are covered by our premium analysis to have weaken against the US dollar for the week.

Result Delights But Prudence Continues

Forex traders factoring our Price Action Bias Signals in their trading plans would be well rewarded as the signal for the week was a perfect match of slightly bearish! We are definitely pleased with the performance thus far but it remains our duty to remind all that forex trading can never be predicted with 100% accuracy. Proper money management is always a must.

The Week Ahead

Here is the expected lineup of economic events for the week ahead. China is included because being a significant trading partner of Australia, it is observed that it often influences the Australian dollar. A number of them may have significant impact the price action. Details can be found below.

CNY Caixin Services PMI
PMI or Purchasing Managers’ Index is a survey 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 Member Williams Speech
Speeches may go into unscripted territory during the Question and Answer segment (if any) and hence may spur unexpected developments and volatility.
AUS Retail Sales
Retail sales 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.
AUS Trade Balance
Trade balance is a measurement on trade volume and net direction. Whether a country is net import or export is important. If more exportation is done, it is likely to be beneficial for the local currency as foreign companies usually buy with the local currency. This creates demand for the currency and adds bullish pressure.
AUS Cash 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. A rate cut is expected for this release and may add bearish pressure. If the central bank unexpectedly maintains the rate, we may see a surge of demand.
AUS RBA Rate 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 FOMC Member Quarles Speech
USA FOMC Member Brainard Speech
Speeches may go into unscripted territory during the Question and Answer segment (if any) and hence may spur unexpected developments and volatility.
CNY CPI
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.
USA Federal Reserve Chair Powell Speech
Speeches may go into unscripted territory during the Question and Answer segment (if any) and hence may spur unexpected developments and volatility.
USA PPI
USA Core PPI
PPI or Producer Price Index is important because the price of goods sold by producers influences the downstream impact of inflation. If inflation is high, a central bank may increase interest rate to mitigate the situation.
AUD RBA Monetary Policy Statement
Economy 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 CPI
USA Core CPI
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.
USA FOMC Member Brainard Speech
Speeches may go into unscripted territory during the Question and Answer segment (if any) and hence may spur unexpected developments and volatility.

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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