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EUR/USD AUD/USD Weekly Forecast 2 Mar 20

In the previous AUD/USD weekly forecast, we saw a return of the bearish momentum. As per our forecast, the currency pair encountered support pressure at the lower bollinger band and the strong sentiment and technical point of 0.66. A continuation of the bearish push would see the currency pair test the significant region of 0.66. A clear breach of this support might open up the descent to 0.64.

In the previous EUR/USD weekly forecast, we noted a failed attempt to breach 1.08. As per our previous forecast, the bearish push encountered significant support at 1.08 and failed to gain a foothold. A continuation of the bullish recovery would need to clear through the resistance at the lower bollinger band followed by 1.09.

Technical Analysis

aud usd forecast

Looking at the AUD/USD weekly chart above, we see the currency pair slip further towards the downside. As expected from our previous forecast, the AUD/USD did attempt to test the strong sentiment and technical region of 0.64 but fell short by a few tens of pips. It had since then eased towards the upside, settling around the region of 0.65.

With the AUD/USD now in a decade low, dating back to the fall out of the 2008 financial crisis, there seem to be no end in sight. It will be good to drop down to the shorter time frames so as to monitor the price action. This allows the possibility of insights to momentum as it forms. Always trade based on the chart, understanding of the market tones and not emotions. Making bets based on the assumption that “it has gone too low, time for a bounce” or “there is no way anything can stop this bear bullet train”, is not the sustainable way to trade forex.

If the bearish pressure continues, it is likely that an attempt for 0.64 will be made.

A bullish recovery will see the AUD/USD face off against the strong sentiment and technical region of 0.66 and beyond that, 0.67.

eur usd forecast

Looking at the EUR/USD weekly chart above, we see a bullish spike. It has gone from the region of 1.08 right up to beyond 1.1. A shout out to the usability of the bollinger bands as indicators of possible targets. In our decade of forex analysis, we have come to embrace the humble bollinger bands as an important technical tool. We have witnessed countless moments where the price action interacted with the bands. In fact, these bollinger bands are one of the contributing factors to the Price Action Bias Signals.

In the upcoming week, the EUR/USD faces a narrow range between the immediate support and resistance. A clear breach of the 1.1 support or 1.1035 resistance may provide insights to the upcoming price action. Beyond these immediate targets, we have possible supports at 1.08 / 1.0865 / 1.09 and resistances at 1.11 / 1.118 / 1.12.

COVID-19 Coronavirus Crisis

The COVID-19 coronavirus continues to spread in China and globally. It is now present in many countries. South Korea has more than 3000 confirmed cases while Italy has more than 800.

The Australian economy is facing an immerse challenge as China is a major trading partner. Factories output in China remains muted and this major strain on the Chinese economy is likely causing significant apprehension towards the Australian dollar. Many analysts are monitoring the actions of the Reserve Bank of Australia. Speculation of a rate cut is increasing as more are doubting that the resilience of the Australian economy can withstand the back to back challenges of the US China Trade War and COVID-19 crisis.

We need to also monitor the situation in the United States. There are now more than 60 confirmed cases and a number of experts are expecting the situation to escalate further. Apprehension is increasing and this likely contributed to the dismal performance of the green buck for the EUR/USD.

Analysts are also following the developments of the crisis in Europe. As more euro countries report cases, apprehension may increase.

Various Economic Data

The Australian economic data was mostly worse than expected. This adds to the narrative that the Australian economy is facing challenging times. Negative sentiment is weighting down the Australian dollar.

The Euro Zone reported mostly better than expected economic data. In particularly, the German German Ifo Business Climate and German Preliminary CPI brought much welcomed sentiment relief as investors are encouraged by the positive data from the eurozone’s largest economy.

The US had mixed results. Towards the end of the week, we received worse than expected personal spending figures. A decrease of expenditure may reflect a weak sentiment among consumers which translates to less upstream economic activities such as business revenue. This likely added to the negative sentiment towards the US dollar.

Interest Rate Cuts

There is increasing speculation that the central banks of Australia and the US may be cutting interest rate soon. Australia’s economy is besieged by its close ties to the Chinese economy while the US is shouldering the impact of the US China Trade War and now, the encroaching COVID-19 crisis.

Investors are sensitive towards interest rates and generally prefer higher interest rates. Such speculation may affect the market sentiment, resulting in increased bearish pressure on the currency pairs.

We are expecting the Australian Cash Rate decision this coming week.

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 )

AUS Company Operating Profits
The earnings of businesses may provide insights into the state of the economy. For example dropping earnings suggest possible economic challenges.

USA ISM 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.

AUS Building Approvals
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.

AUS Current Account
As a measure of money, a rising surplus suggests that the local currency is in demand by foreign traders.

AUS Cash 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.

AUS RBA Rate 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.

EUR CPI Flash Estimate
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.

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.

USA ADP Non-Farm Employment Change
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.
ADP’s statistics is based on the payroll data of approximately 400,000 U.S. business clients. Therefore it is viewed by many as a possible early indication of the US Non-Farm Payroll result.

USA ISM Non-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.

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.

AUS Trade Balance
Trade balance is a measurement on trade volume and net direction. Whether a country is net import or export is important. If more exportation is done, it is likely to be beneficial for the local currency as foreign companies usually buy with the local currency. This creates demand and adds bullish pressure.

AUS 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 Average Hourly Earnings
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 Non-Farm Employment Change
USA 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.

The US Non-Farm Payroll is basically data released by the U.S. Bureau of Labor Statistics on a monthly basis that represents the total number of employed US workers, excluding the following employees:

– general government employees
– private household employees
– employees of nonprofit organizations which provide assistance to individuals
– farm employees

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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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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