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AUD/USD Weekly Forecast 9 Sep 19

In the previous AUD/USD weekly forecast, the currency pair closed as a doji. The AUD/USD drifted towards the downside and did not manage to reach 0.68. If the bullish momentum were to return, we would likely be expecting a test of 0.68. This is a significant sentiment and technical region that the AUD/USD failed to hold for the past month.

The Australian Building Approvals turned out much lower than expected. It was predicted to be flat but turn out to be -9.7%. The US China trade dispute remained a significant influence on the price action.

Technical Analysis

Looking at the AUD/USD weekly chart above, we see the bullish recovery of theĀ  currency pair. As expected, it tested the 0.68 region and ended the week above it.

This is a notable situation as the AUD/USD had not held above 0.68 for the past month. If the bullish recovery continues in the coming week, the currency pair will need to overcome the resistance at 0.69 and the middle bollinger band. The extended target will be the strong sentiment and technical region of 0.7.

A bearish return will now face the strong sentiment and technical region of 0.68, which has turned from resistance to support. The lower bollinger band will likely function as a support, along with 0.67.

Downside Pressure Weakens

The Reserve Bank of Australia maintained the official cash rate at 1.0%. The interest rate statement noted on the reasonable outlook for the global economy. However risk towards the downside remains. This is as per the previous view and hence likely provided little for any continuation of bearish pressure.

In the meantime, encouraging economic data from China provided some uplift to the sentiment towards the Australian dollar. China is a significant trading partner of Australia and hence exerts influence on the Australian economy. Signs that the US and China will resume talks soon likely provided some optimism.

On the other hand, the US released weak economic data at the beginning of the week that likely set the expectation of a weaker USD for the coming days. The US ISM Manufacturing PMI came in at 49.1 instead of 51.2. The Purchasing Managers’ Index is a survey of purchasing managers and is 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.

The Week Ahead

We are expecting a number of high impact economic events.

AUS NAB Business Confidence
Business Climate surveys are influential as the sentiment of businesses 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 Westpac Consumer Sentiment
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 upcoming economic crisis.

USA Core PPI
USA PPI
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.

USA Crude Oil Inventories
Movement of oil supply may bring insights to the level of general economic activities. For example, an increasing supply may suggest excessive production or diminishing demand. A reducing supply on the other hand may suggest an economic pick up.

USA CPI
USA Core CPI
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. Speculations of a possible interest rate hike may generate demand for the currency.

USA Core Retail Sales
USA 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.

USA Preliminary UoM Consumer Sentiment
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 upcoming economic crisis.

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 Major Currency Pairs, Brent Oil, Gold, US Non Farm Payroll analysis and Price Action Bias Signals are available too.

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

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