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EUR/USD AUD/USD Weekly Forecast 16 Mar 20

In the previous AUD/USD weekly forecast, we saw a bullish recovery that climbed past 0.66. From a technical point of view, the currency pair might be trying to return to the previous range above 0.67. A failure of momentum would sent it down to 0.66 and beyond. We reminded on the importance to acknowledge that the long term bearish channel was still valid.

In the previous EUR/USD weekly forecast, we observed the currency pair shooting pass 1.12 and the upper bollinger band. If the bearish pressure returned, the strong sentiment and technical region of 1.12 would likely be a support, followed by 1.11 and the middle bollinger band.

Technical Analysis

Looking at the AUD/USD weekly chart above, we observe a significantly bearish week. As per our mention in the last weekly review, the long term bearish channel remains valid. The currency pair has breached 0.64 and 0.62. This intensity suggests a strong bearish undertone.

In the week ahead, we should be monitoring the price action at 0.62 closely as the overstretched lower bollinger band may exert bullish pressure. If a bullish recovery occurs, 0.63 is likely an immediate target followed by 0.64. As the lower bollinger band is in the 0.64 region, it may complement the resistance of 0.64.

If the AUD/USD remains below 0.62, traders may shift sentiments as times passes and this may result in increased bearish pressure. 0.61 and the strong sentiment and technical region of 0.6 will likely be supports.

Looking at the EUR/USD weekly chart above, we note a return of bearish price action. As mentioned in our last weekly forecast, the currency pair did breach 1.12 and tested the middle bollinger band! Let’s give ourselves a pat on the back. In our decade of forex analysis, we have come to the conclusion that the bollinger bands complement our forex planning as they often function as areas of influence. In fact, bollinger bands are one of the considerations in our Price Action Bias Signals for members.

The EUR/USD has since eased back above 1.11. If the new week brings along continued bearish momentum, the middle bollinger band and strong sentiment and technical region of 1.10 will likely be supports.

If a bullish recovery happens, we will probably see the strong sentiment and technical region of 1.12 and middle bollinger band function as resistances.

Fundamental Analysis

COVID-19 Coronavirus Crisis

The COVID-19 coronavirus continues to spread in China and globally. It is now present in many countries. While the situation in China is on a recovery, the virus is spreading rapidly world wide.

The WHO Director-General mentioned that Europe is now the epicenter of the pandemic, having more reported cases and deaths than the rest of the world, apart from China. Italy has more than 17000 confirmed cases while both Germany and France have more than 3000. This development likely added depressive sentiment towards the euro currency as investors’ apprehension grew.

In the US, there are now more than 1500 confirmed cases. While we have not seen any direct negative impact on the sentiment of the US dollar, we have to monitor closely as the situation unfolds. Investors are likely to react if the infection trajectory steepens.

There is significant risk aversion as we saw equities made record drops with high volatility.

Gold And The US Dollar Index Insights

gold usd index chart analysis

The price of gold has risen in the past week despite the US dollar rising too. As gold is priced in USD ,an increase of value for the currency usually lowers the value of gold. However in this instance, the price of gold has risen too and this suggests significant demand as a result of risk aversion. Members can view the latest Major Currency Pairs, USD Index, Gold, Crude Oil analysis for a visual representation of this market movement.

During times of heightened apprehension, we may see huge price action and volatility. Hence it is important to plan your forex trades well with proper risk management. If the global situation deteriorates, such as the COVID-19 crisis, we may be looking at more market upheaval.

Oil Price Impact

The price of oil has dropped sharply over the weeks due to the significant fall in demand and now the oil price war between Saudi Arabia and Russia added further negative sentiment.

brent aud chart analysis

Looking at the Brent Oil and AUD/USD chart above, we can see the detrimental impact on the Australian dollar. As a commodities based economy, the performance of oil will often influence the Australian economy and by extension the Australian currency. The outlook remains volatile as demand is largely determined by industrial production.

Interest Rate Cuts

An increasing number of analysts and investors are expecting an additional cut to the US Federal Funds Rate in the upcoming week. If this happens, negative sentiment towards the US dollar may surface as investors generally prefer high interest rates.

While the European Central Bank did not cut interest rates, it did announce easing measures to support the economy. This may result in increased liquidity and supply of the euro currency and thus probably weighted down on it.

The Upcoming Economic Impact

The theme of a “pre covid-19″ vs ” covid-19″ economic environment is further entrenched as global medias, analysts and investors increasingly refers to it. There is likely significant apprehension surrounding this.

If economic figures worsen, we may see increased risk aversion. On the other hand, if the various economic support implemented by the central banks and regional / global institutions manage to prop up the economy, we may see increased optimism and by extension risk appetite.

The Week Ahead

We need to monitor the COVID-19 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 )

USA Empire State 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.

AUS Monetary Policy Meeting Minutes
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.

AUS HPI
The House Price Index gives insights into the housing industry’s health. If house prices are rising, it will attract investors and result in economic activity.

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.

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 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 FOMC Economic Projections
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 FOMC Statement
Monetary policy statements 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 Federal Funds Rate
A high interest usually generates demand while a low interest may result in the dumping of the currency for better yielding alternatives. Therefore the interest rate result usually has a significant impact, especially when it is an unexpected result.

USA FOMC Press Conference
Press conferences may go into unscripted territory during the Question and Answer segment and hence may spur 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.

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

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.

If you bought an expensive EA that doesn’t work, why not invest in yourself and spare 20 cents a day for premium analysis. Understand the markets better with our signature knowledge based approach!

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.

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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