EUR/USD AUD/USD Weekly Forecast 1 Jul 19


In the previous week we noted a general decline of the US dollar as traders shift funds to riskier assets. However the AUD/USD remained under 0.7 which might be an indication of weak Australian Dollar sentiment.

The bullish momentum for the Euro currency was significant. It cut across the 1.13 region and middle bollinger band. It appeared that an attempt to reclaim the major technical and sentimental region of 1.14 was underway. This was indicative of a sizable positive sentiment towards the Euro currency.

AUD/USD Analysis
AUD/USD Technical Analysis

Looking at the AUD/USD weekly above we note that the currency pair has managed to breach major sentiment and technical region of 0.7. The week ahead will be crucial as it has yet to be seen if the AUD/USD will be able to gain foothold above 0.7. It is also useful to note that the middle bollinger band lies ahead and may function as an immediate resistance.

Any bearish recovery is likely to face support at the lower bollinger band.

EUR/USD Analysis

EUR/USD Technical Analysis

Looking at the EUR/USD weekly above we note that the currency pair has failed to close above the major technical and sentiment region of 1.14.

The Price Action Bias Signal forecast a neutral bias for the currency pair and indeed the EUR/USD ended the week as a doji. Often, it suggests a situation where traders are apprehensive.

Should there be a bullish attempt in the coming week, the currency pair will need to overcome both 1.14 and the upper bollinger band.

A bearish momentum will likely see an attempt to breach the lower bollinger band.

US Feds Downplay Magnitude Of Cut

After the recent spat of dovish statements, the US Fed seems to be doing some reversal. Officials are reported to be saying that the interest rate cut if any will likely be 25 basis points instead of the widely expected 50 basis. In the grand scheme of things, 25 basis points while still a cut is likely seen as being more acceptable than 50 basis points. This possibly brought back some demand for the US dollar.

Cautious ECB

Across the Atlantic, the European Central Bank remains cautious in while of the geo political situation. It’s officials cited prolonged trade tensions as a drag on economic wellness. Additional stimulus may be required if the economic climate does not pick up. The euro zone’s internal affairs such as Brexit are also a cause of concern.

Trump Drives Up Sentiments

Over the weekend, developments at the G20 seem positive as the US President concluded with the Chinese President that trade talks will continue. In fact Huawei was given some reprieve as President Trump indicated that he will allow US companies to sell to the company.

In a surprise move, the US President also met the North Korean Chairman at the DMZ for a last minute meeting. President Trump became the first  US President to have stepped into North Korea. Both leaders agreed that talks will continue.

In view of the above, we may be seeing a week of risk seeking appetite, barring any unforeseen circumstances.

The Week Ahead

While the euro area will be light in economic events, we do have crucial economic events for both the US and Australia in the week ahead.

The US Non-Farm Payroll will be happening and many see it as a leading indicator of possible US Fed actions. Will the economic data paint an increasingly bleak situation or a climate of growth?

Australia is also expecting a 25 basis points cut to the cash rate. While the market has mostly priced this development, demand for the Australian dollar will likely still see a negative impact.

Here are a number of important economic events.

CNY Manufacturing PMI
CNY Non-Manufacturing PMI
CNY Caixin Manufacturing PMI

PMI or 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.

OPEC Meetings
The Organization of the Petroleum Exporting Countries is an intergovernmental organization of 14 nations.
The stated mission of the organisation is to “coordinate and unify the petroleum policies of its member countries and ensure the stabilization of oil markets, in order to secure an efficient, economic and regular supply of petroleum to consumers, a steady income to producers, and a fair return on capital for those investing in the petroleum industry.”

USA ISM Manufacturing PMI
PMI or 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.

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.

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 Williams Speech
AUS Gov Lowe Speech

Speeches may contain a question and answer segment that at times go into unscripted topics and result in unexpected developments and volatility.

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.

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 and adds bullish pressure.

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’s statistics is based on the payroll data of approximately 400,000 U.S. business clients. Therefore it is viewed by many as a possible early indication of the US Non-Farm Payroll result.

USA ISM Non-Manufacturing PMI
PMI or 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.

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.

USA Average Hourly Earnings
Consumer earnings is important due to it’s upstream impact. With more earnings comes possible increased consumer spending. This translates to revenues, leading to employment and business expansion.

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.

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.

You can also head to our latest feature, the Economic Fundamentals Center for information on the current interest rates and unemployment rates of the countries covered in our analysis of currency pairs.

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

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