In the previous AUD/USD weekly forecast, we observed another bearish week for the currency pair. Should the bearish momentum continue, 0.66 would likely be a significant suport.

In the previous EUR/USD weekly forecast, we noted a bullish recovery. It was testing the 1.11 resistance. A bearish recovery would likely face stiff support at the strong sentiment and technical region of 1.1, followed by the lower bollinger band.

Technical Analysis

Looking at the AUD/USD weekly chart above, we note a bearish week for the currency pair.

It is important to note that this is a repeat attempt to break the 0.668 / lower bollinger band support. This suggests underlying downside pressure. A clear breach of this region will likely open up the path to 0.66 and beyond.

If a bullish recovery happens in the coming week, the AUD/USD will probably target the immediate support and resistance region of 0.675.

Looking at the EUR/USD weekly chart above, we note that the week was bearish.

The currency pair has broken the strong sentiment and technical region of 1.1. This is significant and it may be an indication of further bearish momentum. As per our previous forecast, the EUR/USD is currently testing the lower bollinger band. If bearish momentum continues in the coming week, the EUR/USD will face the lower bollinger band / previous low in Sep 2019, followed by 1.09.

A return of bullish pressure will have the EUR/USD face the support turned resistance region of 1.10, followed by the middle bollinger band.

Wuhan Coronavirus Crisis

The Wuhan coronavirus continues to spread in China and globally. It is now present in many countries. The impact on the Chinese economy is significant and the effects are global as tourism drops. This will add on to the risk aversion narrative as investors are apprehensive towards adverse global situations.

If the situation deteriorates further, it is likely that the risk aversion will intensify.

Yen Strengthens

In times of risk aversion, “safe haven” assets will usually be in demand and hence result in a rise in value. Despite strengthening against many currencies, the US Dollar has weaken against the Yen which is considered a prime choice among “safe havens.” This is a strong indication that risk aversion is significant.

Oil Price Plummets

The price of oil has dropped considerably and this is weighing down currencies such as the Australian Dollar that are influenced by commodities. Many analysts are attributing this to the reduced demand from China as it’s economy get weighted down by the outbreak crisis.

US Non-Farm Payroll Surprise

The US Non-Farm Payroll was better than expected, adding 225k jobs instead of the expected 163k. Having said so, the unemployment rate has risen unexpectedly to 3.6% instead of the expected flat of 3.5%. A number of analysts are of the opinion that the rising of the unemployment rate is the dominant outcome of the US Non-Farm Payroll and hence unfavourable for risk appetite. The reason is because ultimately it is not the number of jobs added that matters but rather the percentage of the eligible workforce that remains unemployed.

The Week Ahead

We need to monitor the Wuhan coronavirus crisis closely. If the condition deteriorates, sentiments may be further affected.

There are also many important economic releases and events due next week. You can find a number of them listed below. ( Not in chronological order )

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

US FOMC Member Bowman Speech
EUR ECB President Lagarde Speech
US FOMC Member Kashkari Speech
AUS RBA Gov Lowe Speech
Speeches may reveal new insights to economic policies or contain a question and answer segment that at times go into unscripted topics resulting in unexpected developments and volatility.

US Fed Chair Powell Testifies
Testimonials may reveal new insights to economic policies or the question and answer segment may go into unexpected topics resulting in unexpected developments and volatility.

USD 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.

EUR EU Economic Forecasts
Economic forecasts are important and monitored by traders and analysts. The idea is to obtain insights to possible future economic polices and conditions. Volatility may increase, especially when the actual data is not as per expectations.

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.

EUR German Prelim 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 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 Prelim 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.

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