In the previous AUD/USD weekly forecast, we noted a bearish week. As expected, the exertion of pull back by the upper bollinger band combined with the resistance at 0.7 limited the price action. Continued bearish pressure would see the currency pair face off against the supports at 0.69, the middle bollinger band and the strong sentiment and technical region of 0.68.

In the previous EUR/USD weekly forecast, we noted an attempt to gain a foothold above 1.12. It was not successful. Any continuation of the downside momentum would likely see an attempt to take 1.11 followed by the middle bollinger band.

Technical Analysis

Looking at the AUD/USD weekly chart above, we observe a bearish week. As expected, the middle bollinger band functioned as a support, limiting the downside price action.

It remains to be seen if the AUD/USD will be able to resume the previous bearish channel. A break below 0.68 will provide a better validation. The middle bollinger band will likely continue to function as a support.

Any bullish recovery will need to break above the upper bollinger band and the strong sentiment and technical region of 0.7.

Looking at the EUR/USD weekly chart above, we observe a bearish week. It fell short of the middle bollinger band and the support of 1.11.

While the EUR/USD is still within the vicinity of the bearish channel, further consolidation will lead the currency pair to the upside of it.

A return of bullish price action will lead to a challenge on the strong sentiment and technical region of 1.12. The upper bollinger band will likely add to the resistance too.

A continuation of the bearish momentum will probably bring a repeat of the challenge on the middle bollinger band and the support of 1.11.

Long time readers will know that we are of the opinion that the bollinger bands provide good reference for possible points of price interaction. This is evident for both the AUD/USD and EUR/USD for the past week. In fact, the bollinger bands is one of the contributing signals for our Price Action Bias Signals.

Risk Aversion Lingers

All but one of the currency pairs in our premium analysis coverage saw the US dollar rising in value. Despite the increase in the value of the US dollar, gold gained in value too, strongly suggesting increased demand. Gold is one of the “safe” assets during times of risk aversion.

Iran conducted missile strikes against US targets in Iraq. This is in response to the American strike that killed Iran’s top military leader. In response, the US announced new sanctions on Iran’s metal exports and eight senior Iranian officials. The markets will be keeping a close watch on what happens next.

Investors are sensitive to geo political developments as there may be a significant impact on the country’s economy and currency. This development likely resulted in the lingering of risk aversion in the markets.

US China Trade War

The US President had earlier suggested that the signing of the phase 1 deal would be between him and the Chinese president. This did not materialize as China’s vice premier Liu is expected to be representing China instead.

Analysts speculate on the reason why Chinese President Xi passed on the signing ceremony. Experts believe that while the phase 1 agreement is a step in the right direction, more needs to be done and there is still the possibility of rocky waters ahead. This probably gave no reason for further positive sentiment.

US Non Farm Hiccup

The US Non-Farm Payroll was worse than expected. It clocked an addition of 145k jobs instead of the expected 162k.

The average hourly earnings also came in worse than expected. Instead of the expected 0.3%, it came out to be 0.1% instead.

Employment is a fundamental component of the economy as it leads to consumer spending and hence retail sales. Consumer earnings is also important as it has an upstream impact. With more earnings comes possible increased consumer spending. This translates to revenues, leading to employment and business expansion.

All in all, the release probably dampened sentiments.

The Week Ahead

Many important economic releases and events are due next week. 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.

USA FOMC Member Harker Speech
USA FOMC Member Kaplan Speech
USA FOMC Member Bowman Speech
EUR ECB President Lagarde Speech
USA FOMC Member Harker 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.

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 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.

EUR ECB Monetary Policy Meeting Accounts
Monetary policy meeting minutes 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.

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 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.

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