In the previous AUD/USD weekly forecast, we observe a bearish week for the currency pair and a bullish recovery would probably face resistance at 0.61 and 0.62. Based on the last few weeks, we might be seeing a pivotal range around 0.6. If indeed so, we could be entering a phase of consolidation.
In the previous EUR/USD weekly forecast, we observe a significant downside dip for the currency pair. The EUR/USD seemed to be pivoting around the strong sentiment and technical region of 1.1. A bullish recovery would likely face resistances at 1.09, 1.1 and the middle bollinger band.
Looking at the AUD/USD weekly chart above, we see the currency pair pushing beyond 0.62 and ending the week below 0.64. These price action spanning across hundreds of pips is likely a result of volatility from the COVID-19 crisis as investors react to developments.
In our previous forecast, we spoke about the possibility of pivotal influence from 0.6. If indeed so, we should see increasing bearish pressure on the AUD/USD. A bearish recovery will likely face supports at 0.62, 0.61, the strong support and technical region of 0.6 and the lowever bollinger band.
If the AUD/USD decides to take things higher, we will probably see significant resistance at 0.64 followed by 0.65, 0.66 and the middle bollinger band.
Looking at the EUR/USD weekly chart above, we observe the currency pair climbing above 1.09. If the strong sentiment and technical region of 1.1 continues to exert pivotal influence, we will likely see bullish pressure in an attempt to push above 1.1. Beyond 1.1 lies the middle bollinger band, 1.11 and 1.12 as possible regions of resistance.
A failure to push on with the bullish momentum will likely see the EUR/USD encounter supports at 1.09, 1.08 and the lower bollinger band.
COVID-19 Coronavirus Crisis Continues
The COVID-19 coronavirus continues to spread globally. It is now present in many countries.
The European region has more than 830000 confirmed cases and more than 70000 confirmed deaths.
The situation in the US is rapidly escalating and the number of confirmed cases is now more than 460000. The number of deaths is now over 16000. A number of analysts are still of the opinion that the US is not well prepared to weather this crisis and that devastating consequences will be seen. With the US being the pandemic epic center now, the situation is closely scrutinized by analysts and investors. Increasing number of economists are expecting the impact to the US economy to be protracted.
On the other hand, China has lifted the restrictions on Wuhan and is now emerging as a country who had seen the worst and survived.
Australian Dollar Hitches A Ride
With the worst behind their backs, the Chinese economy is set to begin it’s path of recovery. This has likely led to increased positivity towards the Australian dollar. China is an important economic partner of Australia and hence many investors are bullish when they see positive Chinese developments.
US Unemployment Claims Remain A Risk
The US Unemployment Claims came out to be worse than expected at 6606k instead of 5000k. However it is lower than the previous amount which was revised even higher to 6867K. While a number of investors were probably relieved that it was lower than the previous release, there are reports stating that the past 3 weeks amounted to a 10% loss of the American workforce. 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 a troubled economy. We need to continue monitoring the employment situation closely.
US Federal Reserve’s Quantitative Easing Delights Equities
The US Federal Reserve launched new measures targeted to support small and mid size businesses and US cities and states. These loans will provide $2.3 trillion and features a one year deferment for payments. This development is likely adding to the US equities’ recovery as investors’ concerns eased. In view of the recent correlation between the US dollar and equities performance, this situation likely weakened the US dollar as increased supply of the currency adds downside pressure.
Despite the above, we need to remain vigilant as sentiments can change in an instant. As the economic impact of the COVID-19 pandemic starts to surface, we may face volatile sentiments.
The Week Ahead
We need to monitor the COVID-19 coronavirus crisis closely. If the condition deteriorates or the containment efforts further impact the economic situation, we may see increased volatility which may result in fickle sentiments. This increases the risk and challenge of forex trading as price action may change in an instant. It will be prudent to drop down to shorter time frames to assess the immediate price action as part of your forex planning. The US is facing increasing scrutiny as the situation implodes and threatens to spiral out of control.
There are a number of important economic releases and events for the week. 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 )
AUS NAB Business Confidence
Business related 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.
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.
AUS Employment Change
AUS 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.
USA Building Permits
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.
USA Philly Fed Manufacturing Index
This survey of manufacturers is important as the sentiment of businesses is a leading indicator of economic health. A healthy sentiment suggests that an economy is moving along well and with the activities of the businesses, downstream benefits will happen such as employment and investment.
The Bottom Line
It is important to follow an economic calendar as your forex trading plans may be impacted due to shifting sentiments. Members do log in to your dashboards for the economic calendar. You should also review the latest Major Currency Pairs, USD Index, Gold, Brent Oil and Price Action Bias Signals 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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