In the previous AUD/USD weekly forecast, the currency pair had a bearish week. It was a repeat attempt to breach the 0.668 / lower bollinger band support. If a bullish recovery happened in the next week, the AUD/USD would probably target the immediate support and resistance region of 0.675.
In the previous EUR/USD weekly forecast, we noted that the week was bearish. The currency pair had broken the strong sentiment and technical region of 1.1. It might be an indication of further bearish momentum. If bearish momentum continued in the following week, the EUR/USD would face the lower bollinger band / previous low in Sep 2019, followed by 1.09.
Technical Analysis
Looking at the AUD/USD weekly chart above, we note a bullish recovery for the currency pair. The Price Action Bias Signals was spot on, providing a slightly bullish signal. Congratulations to our members who had factored that into their forex planning.
The currency pair had bounced off the lower bollinger band as expected, giving us the re-validation that bollinger bands remain an important factor in our analysis. In fact it is one of our contributing considerations for the Price Action Bias Signals. As per expected in our previous forecast, it also attempted to test the resistance of 0.675.
We plotted the bearish trend line from back in 2018 and note that the AUD/USD has slipped back under. This suggests possible bearish undertones. If the bearish momentum returns, we will probably see a test on 0.67, the lower bollinger band and the strong sentiment and technical region of 0.66.
A continuation of the bullish momentum will likely see some resistance along the bearish trend line, followed by the strong sentiment and technical region of 0.68.
Looking at the EUR/USD weekly chart above, we see another bearish week for the currency pair. This is as per the slightly bearish Price Action Bias Signals for the week. Congratulations to our members who had factored that in their trading plan and double congratulations for those who managed to leverage on it for both the EUR/USD and AUD/USD!
The EUR/USD is currently still within the bearish trendline from 2018 and hence we have yet to see any established return of bullish momentum.
If the bearish momentum continues in the upcoming week, we will likely see the strong sentiment and technical region of 1.08 function as a support.
A bullish recovery will probably see resistance at the lower bollinger band / 1.09 followed by the strong sentiment and technical region of 1.1.
CORVID-19 Coronavirus Crisis
The CORVID-19 coronavirus continues to spread in China and globally. It is now present in many countries. While apprehension continues, a number of analysts see the falling rate of new infection in China as a positive development. This likely lead to a reprieve in sentiments which lifted the Australian Dollar. China is a major economic partner of Australia and hence the AUD is often influenced by Chinese developments.
Having said so, the situation is still very fluid and risk aversion remains.
In times of risk aversion, “safe haven” assets will usually be in demand and hence result in a rise in value. In the Gold Price chart above, we see the “timeless” currency rise in value as the months go by. This is an indication that risk aversion lingers.
Lackluster Euro Zone Economies
The Euro Zone continues to be weighted upon by it’s members’ diverse economic situations. Germany, the major economic powerhouse of the region reported a weaker than expected GDP. It was 0% instead of 0.1%. 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. This development likely increased the negative sentiment towards the Euro currency.
US Federal Reserve Holds Fast
In the recent testimony by the US Federal Reserve chairman, the general takeaway is one of equilibrium. Interest rates are seen as appropriate for now and this likely eased some concerns of a possible rate cut. High interest rates often attract investors and hence the perception of a low possibility of any impending interest rate cuts likely gave the US dollar a boost in demand.
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 )
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 Kashkari 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.
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 Wage Price Index
Consumer earnings is important due to it’s upstream impact. With more earnings comes possible increased consumer spending. This translates to revenues, leading to employment and business expansion.
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 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.
AUS Monetary Policy Meeting Minutes
USA FOMC Meeting Minutes
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.
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.
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 French Flash Services PMI
EUR French Flash Manufacturing PMI
EUR German Flash Manufacturing PMI
EUR German Flash Services PMI
EUR Flash Manufacturing PMI
EUR Flash Services PMI
USA Flash Manufacturing PMI
Purchasing Managers’ Index is a survey of purchasing managers and is important as the sentiment of purchasing managers 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.
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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.
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