In the previous AUD/USD weekly forecast, we noted a bearish week. The middle bollinger band functioned as a support and capped the downside price action. A break below 0.68 would provide a better validation of further bearish momentum. The middle bollinger band would likely continue to function as a support.
In the previous EUR/USD weekly forecast, we noted a bearish week and the currency pair fell short of the middle bollinger band and 1.11. It was important to note that while the EUR/USD was still in the vicinity of the bearish channel, further consolidation would see the currency pair break towards the upside. A continuation of the bearish momentum would likely see a challenge on the middle bollinger band and the support of 1.11 again.
Looking at the AUD/USD weekly chart above, we observe that the currency pair is bearish for the 3rd week in a row. Easing off 0.7, it is now approaching the middle bollinger band.
It remains to be seen if this is an attempt to resume the bearish channel from Nov 2019. The middle bollinger band and the strong sentiment and technical region of 0.68 will likely oppose the move.
A return of bullish momentum will see the AUD/USD face the 0.69 resistance, the upper bollinger band and followed by the strong sentiment and technical region of 0.7.
Looking at the EUR/USD weekly chart above, we observe a bearish week for the third time in a row too.
The middle bollinger band appeared to have stopped the price action and is currently the immediate support. A break below the middle bollinger will suggest bearish ambitious, putting the currency pair back within the main bearish channel since Sep 19. The 1.1 region is a strong sentiment and technical support and is likely to present a challenge.
A bullish recovery will need to take down 1.11 before heading to 1.12 which is also a strong sentiment and technical region.
Risk Aversion Recedes
With the passing of time without significant escalation, the markets are adjusting to the norms prior to the US Iran face off. While many officials agree that the crisis is far from over, sentiments are giving it a pass for now.
Investors are sensitive to geo political developments as there may be a significant impact on the country’s economy and currency. This passage of time has likely led to a receding of risk aversion.
We can see in the chart above that gold has dropped in value compared to last week, an indication of better risk appetite as investors leave the “safety” of the timeless currency gold for riskier assets.
US China Trade War
The US and China have agreed and signed the phase one of the US China trade deal. The lack of a significant rally suggests that the markets were expecting more. China compromised and agreed to buy a certain amount of different goods and services. Having said so, it came with conditions.
US President Trump did mention that the next phase of the negotiations would start soon and this includes a discussion on rolling back tariffs. As this develops, any significant progress may spark increased risk appetite.
US Retail Sales Delights
The US Core Retail Sales came in better than expected. It clocked 0.7% instead of the expected 0.5%. This figure excludes automobile sales which can be rather volatile and hence not reflective of the undertones. This likely adds to the narrative that the US economy remains robust despite headwinds and hence led to positive sentiment towards the US dollar.
The Week Ahead
The World Economic Forum annual meetings are due this week. Economic insights may be obtained from press conferences and interviews. As unexpected developments may result in volatility, proper money management is crucial. There are also many important economic releases and events due next week. 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.
EUR ECB President Lagarde 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 Westpac Consumer Sentiment
Consumer surveys are influential as the sentiment of consumers is a leading indicator of economic health. A healthy sentiment suggests that an economy is moving along well and hence consumers are confident. This likely leads to increased retail sales. A cautious sentiment on the other hand may see consumers spend less in view of a perceived upcoming economic crisis.
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.
EUR Main Refinancing 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.
EUR Monetary Policy 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 ECB Press Conference
Press conferences may go into unscripted territory during the Question and Answer segment and hence may spur unexpected developments and volatility.
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.
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 are available too. Members can log in to their dashboards for the latest signals for the upcoming week.
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Traders should always practice proper money management and seek to understand the underlying tones for the market.