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EUR/USD AUD/USD Weekly Forecast 10 Jun 19

In the previous AUD/USD weekly forecast, we noted a doji technical pattern which might be apprehension. There were still signs of a consolidation spilling over from the week before. The currency pair was then in the 0.68 – 0.7 region of price action. We discussed the possibility that the longer the AUD/USD remained in this region without a successful breach of 0.7, the more likely a new phase of price action had began. The lower bollinger band would function as the immediate support followed by the significant sentimental and technical region of 0.68. Bullish momentum would likely face 0.7.

For the previous EUR/USD weekly forecast, we observed futile efforts to hold the 1.12 line. This was inline with our previous review’s assessment that the bearish undertone remained and as expected, the lower bollinger band functioned as a support. We mentioned a consistent clocking of lower highs by the EUR/USD while not seeing an obvious trend of lower lows. We cautioned on the possibility of a technical squeeze.
Important regions for the new week would be 1.12 followed by the middle bollinger band as a resistance and the lower bollinger band as a support.

AUD/USD Forecast
AUD/USD Technical Forecast

In the AUD/USD weekly chart above, we observe the currency pair attempting to breach 0.7 as expected.  As per our mention last week, the longer the AUD/USD fails to breach 0.7, the higher the possibility that the price action has shifted to the region of 0.68 – 0.7 . In the week ahead, there will be two notable possibilities to be monitored. Firstly we need to monitor if the currency pair continues to test the 0.7 sentiment and technical region. If the currency pair manages to gain a foothold above 0.7, we need to watch if the currency pair remains above 0.7 for the week. The middle bollinger band will likely be a resistance. Therefore the yellow shaded region should be monitored.

Any bearish return will send the AUD/USD back towards the lower bollinger band.

EUR/USD Forecast EUR/USD Technical Analysis

In the EUR/USD weekly chart above, we observe the currency pair successfully breaching the middle bollinger band and remaining above it. In the previous forecast, we cautioned on the possibility of a technical squeeze and here it is. It warms our hearts when we see our forecasts being so spot on. Yeah! Having said so, as always we need to remind ourselves constantly to not be carried away by our success as forex remains something we can never expect  to 100% forecast. Proper money management and understanding of the market is key.

For the week ahead we will need to monitor the yellow shaded region. Two scenarios are likely. First is that the EUR/USD loses the upside momentum and slides back down towards the middle bollinger band which has turned from resistance to support. Further momentum will see the currency pair back to 1.12. If the bullish pressure remains, 1.14 is the next major resistance. Should the currency pair end the week within the yellow shaded area without hitting 1,14, the possibility of hitting 1.14 remains as long as the price action is within the yellow shaded area.

Reserve Bank of Australia Cuts

As part of the effort to stimulate the Australian economy, the RBA has lowered the interest rate from 1.5% to 1.25%. The previous interest rate was held for almost 3 years before this new record low is made. Furthermore, the RBA mentioned that if need be to cut rates further, it will not be unreasonable. We know what a low interest rate or even the prospects of a low interest rate can do to a currency pair. This is clearly observed with the AUD/USD’s limited upside push despite the US dollar weakening across the market. The sentiment towards the Australia currency is likely to be rather low. It will not be surprising if supply exceeds demand as traders cut their positions, further adding to the downside pressure.

US Federal Reserve May Cut

In a bombshell to the market, Fed Official James Bullard mentioned that the inflation rate remains low and the US trade wars are affecting the US economy. The growth momentum that the market has become used to for the past few years is fading. A significant slowdown may be in the works. In view of the situation, the US Federal Reserve may be poised to cut the interest rate to support the economy. Interest rate related statements garner 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 such statements thoroughly for insights on the interest rate policy. The US dollar was initially hiking interest rates but then transited to an uneasy pause and now with this dovish statement, it is likely that negative sentiment towards the US dollar has increased significantly. In fact it is rather obvious as the US dollar saw red across the market for the week.

European Central Bank Mixed

The ECB mentioned that the current level of interest rate will stay until the mid 2020. While normally an encouraging statement, the subsequent comment raised eye bows. President Mario Draghi mentioned that officials had started a discussion about an interest rate cut or new quantitative easing measures such as bond purchases. Quantitative easing results in increased liquidity putting pressure on demand as supply increased. Something that traders holding the euro wont be too fond of.

Future Of The US Dollar

We mentioned before of the enormous debt the US has accumulated and the supposed effect on the US dollar. The US dollar rally over recent years may be due to positive sentiments arising from the US stocks rally and interest rate hikes. However we have observed an interesting outcome for the past two US Non-Farm Payrolls.

The latest US Non-Farm Payroll came out much worse than expected. It reported 75k instead of the forecast of 177k. It is no surprise that the US dollar took a hit. Having said so, in our premium analysis of the US Non-Farm Payroll, we find that the previous report while being better than expected, resulted in a weakening of the US dollar too. The premium analysis is color coded and hence helps a lot in the visualization of patterns and trends. This brings an interesting suggestion that the US dollar is getting sold regardless of outcome. Should this pattern continue, it is definitely suggestive that the positive sentiment towards the US dollar is waning. Members can log into their dashboard for the analysis. Non members may want to take advantage of the time limited promotion of less than $0.20 a day and get premium analysis! This also supports us in our operation of the website.

The State Of The Market

Long time readers will see this coming. For months we have mentioned on the apparent decline of the markets. The US economy faces challenges with it’s fading growth and increasing trade challenges. The Australia economy is burdened by geo political tension due to the significant trading relationship with China. The Euro Zone economy remains stretched with the diverse economic challenges of the various member countries. We may be a heading to a phase where it is a comparison of weakness instead of performance.

The Week Ahead

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.

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.

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.

AUS Employment Change
AUS 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.

CNY Fixed Asset Investment
Infrastructure spending gives an insight into the current economic climate. If there are increased activities associated with the building of factories, roads, etc, it may suggest that the economy is poised to do well. Furthermore the construction activities will result in employment, sales of materials, etc.

CNY Industrial Production
Industrial production serve as a leading indicator of economic activity. If production is high, economic activities flow downstream leading to employment, revenue and more.

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.

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. It is also available on mobile. You can head over to the mobile applications section to download the Android apps available for free.

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

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