In the previous AUD/USD and EUR/USD weekly forecasts, we noted on the increased strain on the economic situation. The US and China trade fallout was akin to an anchor of a ship, dragging on sentiments. Risk appetite was sporadic.

The AUD/USD made a lower high and this suggested bearish pressure. The EUR/USD while appearing “bullish” on the shorter time frames, was actually still harboring the downside trend on the weekly time frame.

AUD/USD

AUD/USD Technical Analysis

Looking at the AUD/USD weekly chart above, we note that the currency pair was bearish for the week. The momentum was strong and it cut across the major sentiment and technical region of 0.69. It is now on an approach for 0.67. This is not unexpected as we had mentioned last week of the lower highs. As of all significant momentum, there may be some consolidation but we also need to plan carefully to avoid trying to “catch a falling butter with a knife”.

If the bullish pressure returns, we will likely see an attempt to regain 0.7. This is however dependent on the resistance given by the lower bollinger band and 0.69.

EUR/USD

EUR/USD Technical Analysis

The EUR/USD was bearish for the week. Looking at the EUR/USD weekly chart above, we see a gradual slope of the currency pair. As per what we mentioned in our previous review, the downside momentum is not over.

The lower bollinger band and 1.11 will function as supports in the new trading week while the strong sentiment and technical regional of 1.12 will be the immediate resistance. The middle bollinger band and 1.13 will be the extended resistance.

Australia’s Nasty Surprise

We mentioned last week that on the contrary of expectations, the RBA did not cut the interest rate. Having said so, it was not enough to bring a flood of risk appetite to the Australian dollar due to the US China trade fallout.

This week saw the unemployment rate raised to 5.2% instead of the expected 5%. Employment is a fundamental component of the economy as it leads to consumer spending and hence retail sales. A high unemployment rate is an indicator of a troubled economy. With the worst than expected result, risk appetite was likely subdued significantly. Market pricing is suggesting a high probability of a rate cut in June. Not only did the unexpected hold on interest rate failed to impress, sentiment has further deteriorated due to the unemployment rate.

Euro Zone Woes

The German ZEW Economic Sentiment was much worse than expected. It came in at -2.1 instead of the forecast of 5.1. That is a drop of over 140%. This survey of analysts who probably have good working knowledge of the economy suggested that general sentiment towards the economy is negative. The German Preliminary GDP and Euro Flash GDP was as per forecast. Bringing in neither dampening nor uplifting sentiments.

USA Data Adds Confidence

We saw a strong showing of economic data towards the end of the week. The Philly Fed Manufacturing Index came in at 16.6 instead of 10. This is more than 50% to the upside. 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.

The Preliminary UoM Consumer Sentiment also came in much better at 102.4 instead of 97.8. 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.

US China Trade Fallout

A recent source of risk aversion comes from the clash of the two global economic powers. Things had gone down pretty quick. From an initial sense of optimism of a trade deal, the US had since then implemented additional tariffs sparking a tit for tat showdown. The US then moved to blacklist Chinese telecom giant Huawei. China had since then announced that there is no plans for resuming talks in the near future. Risk aversion is flowing out into financial markets, causing depressed prices far and wide.

In view of this current geo political situation, price action may be rather sentimental in nature. With positive development increasing risk appetite and negative development creating risk aversion where assets deemed as “safe” such as the US dollar will be sought after.

US Dollar Index

This usually results in the increase of value of the US dollar as we can see in the US Dollar Index chart above where it is at a high.

It is always challenging to trade in sentiment laden price action as things can change in a moment. Proper money management is important and at times, staying on the side may be a wise decision.

The Week Ahead

USA FOMC Member Clarida Speaks
USA Federal Reserve Chair Powell Speaks
Speeches by central bank officials may contain a question and answer segment that at times go into unscripted territory and result in unexpected developments and volatility.

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.

USA FOMC Member Evans Speaks
USA FOMC Member Rosengren Speaks
Speeches may contain a question and answer segment that at times go into unscripted territory and result in unexpected developments and volatility.

AUS Construction Work Done
This tracks the value of construction work done and being a sizable industry, it leads to insights on the level of economic activities.

AUS Reserve Bank of Australia Gov Lowe Speaks
Speeches by central bank officials may contain a question and answer segment that at times go into unscripted territory and result in unexpected developments and volatility.

USA FOMC Member Bullard Speaks
USA FOMC Member Williams Speaks
Speeches by central bank officials may contain a question and answer segment that at times go into unscripted territory and result in unexpected developments and volatility.

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.

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
PMI or Purchasing Managers’ Index is a survey of purchasing managers are 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.
Germany and France are both significant economies of the Euro Zone. Therefore the market may be more sensitive towards these releases.

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.

EUR European Parliamentary Elections (Multiple days)
Investors are sensitive to sovereign developments as any political changes may have significant impact on the country’s economy and currency.

EUR Euporean Central Bank 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.

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.

There are many more events and hence it is important to follow an economic calendar. By doing so, you can reduce the possibility of an unexpected development affecting your trading plan. Members can log in to their dashboards for an economic calendar. The latest premium analysis and our popular Price Action Bias Signals are now available too.

Traders should always practice proper money management and seek to understand the underlying tones for the market.