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EUR/USD AUD/USD Weekly Forecast 11 Nov 19

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In the previous AUD/USD forecast we noted that the currency pair has managed to breach the middle bollinger band. While it closed the week above 0.69, we must be mindful that support and resistance lines are usually not a line of single pip but rather a zone of influence. It remained to be seen if the AUD/USD would remain above 0.69.

Any return of bearish pressure would see the AUD/USD take on the middle bollinger band again followed by 0.68.

In the previous EUR/USD forecast we noted that the currency pair managed to breach the middle bollinger band. Having said so, it failed to test the strong sentiment and technical region of 1.12. We should note that the currency pair had tried to breach this resistance a number of times now.

A return of bearish pressure would probably encounter support at the middle bollinger band followed by 1.11 and 1.1.

Technical Analysis

Looking at the AUD/USD weekly chart above we note that the currency pair was bearish for the week. As expected, the currency pair did not hold the region of 0.69. The middle bollinger band functioned as a support and capped the bearish momentum.

Over the years, we have come to appreciate the influence of the bollinger bands and it is one of our consideration for the Price Action Bias Signals.

In the upcoming week, continued bearish momentum will need to overcome the middle bollinger band before heading for a test of the strong sentiment and technical region of 0.68. If the AUD/USD succeeds, we may see further support at 0.67 and the lower bollinger bands.

A bullish recovery will likely face resistance at 0.69 before an attempt at 0.7.

Technical Analysis

Looking at the EUR/USD weekly chart above we note that the currency pair was bearish for the week. As expected, the bearish pressure did manage to push through the middle bollinger band and 1.11. It is currently on an approach to test the strong sentiment and technical support of 1.1.

If a bullish recovery returns, we will likely see a push for the support turned resistance region of 1.11 and the middle bollinger band. 1.12 remains a valid extended target.

A continuation of the bearish pressure will require the support of 1.1 to be breached before an attempt at the lower bollinger band and previous low.

Australian Economy Lags

Early in the week, the Australian retail sales was reported to be lower than expected. It came in at 0.2% instead of 0.4%. 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. This likely added negative sentiment for the Australian dollar.

Concerns remain as the US China trade dispute drags on. As China is a significant trading partner of Australia, downside pressure is probably inevitable.

US China Trade Dance

It was reported that Chinese officials mentioned that the US is agreeable to a phased tariff reduction if a deal is reached. This might have added momentum to the risk appetite of the market. Having said so in the latest reports, President Trump had commented that a total removal of tariff is not possible. This might have sent ripples throughout the markets. We will need to monitor closely when the markets open to assess the state of sentiments.

Euro Zone Economical “panic”

The European Commission had cut the Euro area growth and inflation outlook for 2020. This sets the stage for the view that the EU’s economy appears to be going into an extended period of low growth and inflation. A number of analysts were reported to be of the understanding that the worst has yet to come. The uncertainty of the US China trade dispute and Brexit continue to weight down the region. Furthermore there is the ongoing possibility of an increase in car tariffs by the US. This is adding to the apprehension that a further escalation of a global trade war may be a possibility.

Long time readers will remember that we are of the opinion for many years that due to the different characteristics of the various economics in the Euro Zone, synergy and progress will likely be complicated. It will probably require a significant economic and political willpower for the region to push through the encumberment.

The Week Ahead

USA FOMC Member Clarida Speech
AUS RBA Assist Gov Bullock Speech
USA FOMC Member Clarida Speech
USA FOMC Member Bullard Speech
AUS RBA Deputy Gov Debelle Speech
EUR German Buba President Weidmann 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.

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.

EUR German ZEW Economic Sentiment
As a survey of analysts, this sentiment report holds a weight. Their sentiments may be derived from their working knowledge of the economy and hence may be an early indicator of economic health.

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.

AUS Wage Price Index
Employment cost is a leading indicator of inflation. If cost rises, the increase is reflected downstream in the price of production and products. If inflation is high, a central bank may increase interest rate to mitigate the situation.

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 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.

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.

EUR German Preliminary 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 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 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.

Following an economic calendar is vital so that your forex trading plan factors in the events. Members can log in to their dashboard for an economic calendar. The latest Major Currency Pairs, USD Index, Gold, Crude Oil and Price Action Bias Signals analysis are available too.

Last week our Price Action Bias Signals for all six currency pairs were showing a neutral signal. This suggested uncertainty and apprehension in the markets. It was rightly so as we observe the high degree of uncertainty and mix signals swamping the markets for the week. Members can log in to their dashboards for the latest signals for the upcoming week.

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