In the previous AUD/USD weekly forecast, we saw the currency pair pushed beyond 0.62 and ending the week below 0.64. If the AUD/USD decides to take things higher, we will probably see significant resistance at 0.64 followed by 0.65, 0.66 and the middle bollinger band.
In the previous EUR/USD weekly forecast, we observed the currency pair climbed above 1.09. If the bullish momentum fizzled, we would likely see the EUR/USD hit support at 1.09, 1.08 and the lower bollinger band.
Looking at the AUD/USD weekly chart above, we see the currency pair clocked a slightly bullish week. Considering the general US dollar strength for the week, this suggests that the bullish momentum was significant. Previously we mentioned that the bollinger bands have a natural tendency to seek equilibrium and it appears to be so as we observe the attempts by the currency pair to retreat from the downside stretch.
As mentioned in our previous weekly forecast, the AUD/USD did encounter tough resistance at 0.64, ending the week below it. If bullish momentum continues to exist, 0.64 must be clearly breached before we see any sustainable attempt on 0.65 and the strong sentiment and technical region of 0.66. The middle bollinger is also in the vicinity of 0.66 and will probably complement the resistance.
Should the AUD/USD turn bearish in the week ahead, we are likely looking at 0.63, 0.62 functioning as supports. The lower bollinger band lies below 0.6 and it may serve as an extended target for any major bearish push.
Looking at the EUR/USD weekly chart above, we observe a bearish week for the EUR/USD. The currency pair has tested both the support of 1.08 and resistance of 1.1. It remains to be seen if a pivot is developing around 1.1 as bullish pressure has been lacking. If the EUR/USD continues to range between 1.08 and 1.1, we may be seeing a formation of a consolidation channel instead.
A return of bullish pressure in the upcoming week will see the EUR/USD face resistances at 1.09, 1.1 and the middle bollinger band. If the bearish momentum continues, we will need to see a clear breach of 1.08 and the lower bollinger band before an attempt can be made to push the bearish low further beyond the current mark.
COVID-19 Coronavirus Crisis Continues
The COVID-19 coronavirus continues to spread globally and yields a significant influence on global economics.
The European region has more than 1 million confirmed cases and more than 90000 confirmed deaths.
The US has more than 660000 confirmed cases and more than 32000 confirmed deaths. A number of analysts are of the opinion that the US is not well prepared to weather this crisis and that devastating consequences will be seen. Increasing number of economists are expecting the impact to the US economy to be protracted.
On the other hand, China is now emerging as a country that had seen the worst and survived. Recent economic figures suggested that a recovery of the Chinese economy is taking shape.
Australian Dollar Continues The Ride
With the worst behind their backs, the Chinese economy is set to begin it’s path of recovery. This has likely led to continuation of the increased positivity towards the Australian dollar. China is an important economic partner of Australia and hence many investors are bullish when they see positive Chinese developments. Having said so as the economic situation is still fluid, any surprise deterioration will possibility trigger volatility and downside risk.
Australian Employment Market Green
In the latest Australian employment report, 5.9k jobs were added instead of the expected -33k. The unemployment rate turned out to be 5.2% instead of the expected 5.4%. Considering that employment is a fundamental component of the economy, these developments likely added to the positive sentiment towards the Australian Dollar. Analysts warned that the increase of jobs is likely due to the hiring made by supermarkets and their supporting industries and cautioned that April’s employment report may show a clearer picture of the pandemic’s economic impact.
US Unemployment Claims Remain A Risk
The US Unemployment Claims came out to be better than expected at 5245k instead of 5350k. While this seems to be a positive development, the underlying situation remains that a decade of jobs creation has been undone. The economic damage done to the US will likely show up in economic data releases soon. For example, in our 16 Apr 20 EUR/USD forecast update, we learn that the US Retail Sales was reported to be worse than expected. It was announced to be -8.7%. instead of -8%.
US Equities Rally
The S&P 500 ended the week higher and this has lead to a number of analysts cautioning on the possibility of a bull trap, ie false signal. We previously spoke of the temporary correlation between the S&P 500 and EUR/USD where a drop in equities often comes with a rise in US dollar. If the S&P 500 continues to rise, we will need to observe if the temporary correlation remains which should translate to a weaker US dollar.
The Week Ahead
We are expecting a number of purchasing managers indexes to be released. If the sentiments deteriorate, we may see increased volatility which can possibly result in fickle sentiments. This increases the risk and challenge of forex trading as price action may change in an instant. It will be prudent to drop down to shorter time frames to assess the immediate price action as part of your forex planning.
There are a number of other important economic releases and events for the week. 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
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 RBA Gov Lowe 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.
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.
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.
EUR German ifo Business Climate
Business Climate surveys are influential as the sentiment of businesses 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 Core Durable Goods Orders
USA Durable Goods Orders
Reports on the orders of goods are leading indicators of production and thus the level of economic activities. Increasing purchase orders suggests that manufacturers will increase activity to meet the demand, providing downstream benefits such as employment. On the other hand, decreasing orders may indicate an upcoming economic crunch.
The Bottom Line
It is important to follow an economic calendar as your forex trading plans may be impacted due to shifting sentiments. Members do log in to your dashboards 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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