In the previous AUD/USD weekly forecast, we saw a bullish week for the currency pair. The week ahead would be crucial as we needed to determine if the bullish momentum could sustain. A bearish recovery would likely encounter support at the strong sentiment and technical region of 0.64.
In the previous EUR/USD weekly forecast, we noted a bearish week for the currency pair. If the bearish momentum continued in the week ahead, the price action would probably hit support at the strong sentiment and technical region of 1.08.
Looking at the AUD/USD weekly chart above, we see a bearish week as mentioned in our previous forecast. The down side pressure from 0.66 was indeed significant.
The upcoming week will bring us another crucial moment as the price action attempts to navigate the strong sentiment and technical region of 0.64. A successful breach will open up 0.62 for the AUD/USD.
If the currency pair fails to take down 0.64, the bullish recovery will likely face resistance at the middle bollinger band and 0.66.
Looking at the EUR/USD weekly chart above, we note that the week ended slightly bearish. The doji candle stick suggests a lack of conviction on the part of the traders as the EUR/USD was almost flat for the week.
There have been multiple failed attempts to breach the strong sentiment and technical region of 1.08. As the current price action is still within the long term bearish channel, there is nothing to exclude the possibility of a new attempt to breach 1.08. If the EUR/USD succeeds, it will probably face support at 1.07 / the lower bollinger band. Any extended stretch will likely see 1.06 as the target.
In the event of a bullish recovery, we will probably see resistance at 1.09 followed by the middle bollinger band / bearish trend line. The strong sentiment and technical region of 1.1 will be in the vicinity too and it may synergize with the other resistances.
Risk On, Risk Off
Despite the initial risk seeking sentiment brought about by developments such as the start of US Federal Reserve’s plan to purchase exchange-traded funds on May 12. The initial momentum gave way to a string of worse than expected economic data. Most of the price action on the shorter time frames are sentiment driven and thus it was not unexpected to see the shift from risk seeking to risk aversion.
In our premium analysis where we track the performance of the US dollar against the assets we monitor, it was highly suggestive of a flow to the USD so as to purchase gold. The US dollar was stronger versus the other currencies but weaker against gold. Being a “safe haven” asset, gold is usually in demand during times of risk aversion and apprehension. This probably lead to the rising of value of gold. Members should log in to their dashboard to see the latest analysis.
The Unemployment Situation
Both the AUS Employment Change and USA Unemployment Claims were worse than expected. This continues the worrying trend of deteriorating employment climate. Employment is a fundamental component of the economy as it leads to consumer spending and hence retail sales. With the current bleak situation, the other facets of the economy will be affected and this inevitably will likely lead to further deterioration.
US Retail Sales Plunges
The US Retail Sales was reported to be -16.4% instead of the expected -12%. This is a significant gap towards the down side which likely injected risk aversion to the market. With the diminishing retail sales, it will translate into lesser wholesales revenue as retailers will not be ordering as much goods as before. This will in turn affect the manufacturing industry and commodities demand as wholesalers will not be seeking as much production as before.
The Week Ahead
There are a number of important economic releases and events for the week. Numerous Purchasing Managers’ Indexes are due to be release. It is important to monitor the sentiment so as to understand the economic undertones. 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 Monetary Policy Meeting Minutes
USA FOMC 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.
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 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 RBA Gov Lowe Speech
USA Fed Chair Powell 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 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 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 Flash Manufacturing PMI
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
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.
The Bottom Line
It is important to follow an economic calendar as your forex trading plans may be affected due to shifting sentiments. Members do log in to your dashboard for the economic calendar. You should also review the latest Major Currency Pairs, USD Index, Gold and Brent Oil 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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