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EUR/USD AUD/USD Weekly Forecast 1 Jun 20

In the previous AUD/USD weekly forecast, we noted a bullish week. In the week ahead, a continuation of the bullish momentum would need to breach 0.66 decisively before moving on.

In the previous EUR/USD weekly forecast, we noted a bullish week. The price action was halted by the middle bollinger band and the strong sentiment and technical region of 1.1. In the week ahead, a continuation of the bullish momentum would require it to breach the upper bearish trend line followed by the middle bollinger band / 1.1 region.

Technical Analysis

AUD USD weekly forecast

Looking at the AUD/USD weekly chart above, we observe another bullish week for the currency pair. The strong technical and sentiment region of 0.66 was breached but the price action fell short of the 0.67 resistance.

In the upcoming week, we need to pay close attention to the long term bearish trend line. The AUD/USD is at upper limits of the trend and may experience some downside pressure. A return of bearish momentum is likely to face support at 0.66, followed by the combination of 0.65 and the middle bollinger band.

If the bullish momentum continues, the strong sentiment and technical region of 0.68 will likely function as a significant resistance.

EUR USD weekly forecast

Looking at the EUR/USD weekly chart above, we observe a bullish week too. The price action did not manage to reach the strong sentiment and technical region of 1.12 and is now around the region of 1.11.

A continuation of the bullish momentum will likely see an attempt on 1.12. We can see from previous interactions that the region is likely to be of significant resistance. If the EUR/USD succeeds, the next resistance will probably be the upper bollinger band.

If a bearish recovery happens, we are likely to see 1.1 function as a support and after which, the middle bollinger band,

Fundamental Analysis

Crude Oil Uplifts The Australian Dollar

Commodities are a significant component of the Australian economy and hence the economy by extension is influenced by the price of it.

rising oil price chart In recent weeks, oil has been recovering lost ground and this probably contributed to the bullish momentum of the AUD/USD. As economic activities pick up globally, there may be further upside pressure for the price of oil. In forex, the analysis of correlation can sometimes provide useful insights and hence it is important that we continue to monitor the price of oil.

Euro Climbs At Expense Of The US Dollar

Long time readers will know that we mention from time to time that the dynamics between the EUR and USD often boils down to the fact of which economy is the weaker one.

While the US equities are fast reclaiming lost ground, a number of analysts are attributing this to the hyped optimism that the US Federal Reserve stands ready to provide more support. Both the US Unemployment Claims and Pending Home Sales were worse than expected. Particularly, the US Pending Home Sales came out to be -21.5% instead of -15%, over 40% off the mark. The purchase of a house results in economic activities. Renovation jobs will be created for construction workers, the various sub contractors and services associated with new ownership such as power, water, furniture and so on. This bleak situation will affect the other facets of the economy.

Another dynamic at play would be the effect of the supportive measures taken by the US Federal Reserve. While it is not visibly obvious, simple economics state that when there is an increase of supply, downside price pressure will emerge. These quantitative easing measures taken by the central bank results in a flood of liquidity and that is likely to add bearish pressure to the US dollar.

In our premium analysis of the major currency pairs and financial assets, the picture is indicative of a general US dollar weakness in recent days. It will be prudent to monitor closely as this unfolds. Members should log in and review the information before formulating your forex trading plans.

US Unemployment Crisis

The US employment situation continues to deteriorate, bringing another worse than expected week of new unemployment claims. It was estimated to be 2100k but the data turned out to be 2123K people who filed for unemployment claims for the first time. Employment is a fundamental component of the economy as it leads to consumer spending and hence retail sales. A high unemployment rate is an indicator of an economy under distress as the unemployment will put a strain on upstream economic factors such as retail revenue. The US Non-Farm Payroll is due to be released in the upcoming week and it will likely provide more certainty to the current situation.

The Week Ahead

There are a number of important economic releases and events for the week. It is important to monitor the sentiment so as to understand the economic undertones. Any development that may lend weight to the current apprehension may further add to the sentiment and increase the intensity of it. You can find a number of them listed below. ( Not in chronological order )

USA ISM Manufacturing PMI
USA ISM Non-Manufacturing PMI
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 Current Account
As a measure of money, a rising surplus suggests that the local currency is in demand by foreign traders.

AUS Cash Rate
A high interest usually generates demand while a low interest may result in the 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.

AUS GDP
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 and thus wields influence on the home currency.

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.

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.

EUR Main Refinancing Rate
A high interest usually generates demand while a low interest may result in the 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.

EUR Monetary Policy Statement
Monetary policy statements are given much attention by analysts and investors as it has an impact on the economy. The minutes will be analysed thoroughly for insights on the economic policy ahead. Significant volatility may be generated if there are unexpected revelations.

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

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
USA Unemployment Claims
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 Non-Farm Payroll is basically data released by the U.S. Bureau of Labor Statistics on a monthly basis that represents the total number of employed US workers, excluding the following employees:

– general government employees
– private household employees
– employees of nonprofit organizations which provide assistance to individuals
– farm employees

The Bottom Line

It is important to follow an economic calendar as your forex trading plans may be affected due to shifting sentiments. Members do log in to your dashboard for the economic calendar. You should also review the latest Major Currency Pairs, USD Index, Gold and Brent Oil analysis to complement your forex trading plan.

It is important to conduct defensive forex trading ( proper money management, realistic stop loss and take profits, etc ) as sentiments may shift in an instant from unexpected developments, resulting in a corresponding shift in price action.

Traders should always practice proper money management and seek to understand the underlying tones for the market. May the pips be with you!

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