The week saw the US dollar dropping in value at the start. As the days passed, an emergence of bullish uplift for the US dollar happened across many currency pairs. Lost ground was reclaimed and the gain extended beyond for many currency pairs.
In the previous AUD/USD forecast we noted that the currency pair was bullish for the week. It went for a test of 0.72 but failed to breach it. Should a retest occur, it would be likely to see the upper bollinger band function as the extended resistance. Any bearish return would face the middle bollinger followed by the strong sentiment and support region of 0.7.
In the previous EUR/USD forecast we noted that the currency pair was also bullish for the week. It attempted to test the middle bollinger band but failed. The week ahead would see the middle bollinger band provide an immediate resistance again, followed by the strong sentiment and resistance region of 1.14. If bearish momentum returned, a push towards 1.12 would be likely.
AUD/USD Technical Analysis
Looking at the AUD/USD weekly chart above we note that the currency pair was bearish for the week. As expected, the middle bollinger band capped the progress of the momentum.
The week ahead will likely see familiar numbers with the middle bollinger and the strong sentiment and support region of 0.7 standing in the way of any bearish momentum.
On the other side of the fence, we have the strong sentiment and resistance region of 0.72 functioning as immediate resistance, followed by the upper bollinger band as extended resistance.
The Price Action Bias Signals for the AUD/USD was slightly bullish and we had a number of members writing in to share their successes during the early part of the week. Congratulations!
On the other hand we do have a few members who failed to grasp the opportunity due to an insufficient trading plan. We would like to take this opportunity to share the learning with all. Forex trading should always be done with proper money management and having the take profit / stop loss factored in the plan. The week’s initial bullish momentum would have easily given tens of pips to the trader with a reasonable take profit or trailing stop loss. Do be mindful that momentum can change without any warning!
EUR/USD Technical Analysis
Looking at the EUR/USD weekly chart above we note that the currency pair was bearish for the week. The middle bollinger band kept in check any bullish effort and sent the EUR/USD down towards the strong sentiment and support region of 1.12.
We expect the lower bollinger band and 1.12 region to function as an immediate support in the upcoming week. A bullish return will need to challenge the middle bollinger band and resistance region of 1:13.
Chinese Green Numbers
The early bullish sentiment was likely fueled by the better than expected numbers released by China. GDP came in at 6.4% instead of 6.3%, suggesting that China’s economy continues to hold its own. China is a major economy in the global stage and hence often influences global sentiment. Furthermore it has an extensive trading relationship with Australia and hence plays a bigger role in the dynamics of the Australian dollar.
German Flip Flop
Initially, we saw the German ZEW Economic Sentiment coming in much better than expected. It was reported to be 3.1 instead of the predicted 0.9. This is a survey of investors and analysts and hence holds a significant weight among the market. This is because being financial professionals, they are thought to have knowledge of the dynamics of the economy and hence their opinions may be an early indicator of economic health.
The euphoria was short lived however as the German Manufacturing Purchasing Managers’ Index came in worse than expected. It came in as 44.5 instead of 45.2. In order to understand the negative sentiments streaming from this result, we need to understand the index.
Firstly, a number of below 50 is an indication of contraction. Therefore, 44.5 is not only a worse than expected result, it is also a contraction.
Secondly, the previous release was 44.7. When you compare 44.7 to this latest 44.5 figure, the picture is clear that the contraction is getting worse for now.
Lastly. Germany is the biggest economy in the Euro Zone.Therefore this contraction represents a major chuck of the combined Euro Zone economy.
In view of the above, the impact on the euro currency was likely to be significant.
North Korea Summit Woes
The second summit between the leaders of the US and DPRK ended without a deal. Much is needed to be done and now with North Korea conducting a tactical weapon test, investors are having apprehension about the path ahead. State media also reported that North Korea do not want the U.S. Secretary of State Mike Pompeo to be involved in nuclear talks. North Korea is requesting for someone who “is more careful and mature in communicating”. Investors are averse to sovereign issues as the economy and market may be significantly affected. Risk aversion was likely triggered and hence assets usually deemed as “safe” such as the US Dollar gained in value.
US Retail Sales Climbs
The US retail sales came in much better than expected at 1.6% instead of the expected 0.9%. This is much welcomed versus the previous -0.2%. 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. Therefore this result is likely to increase the positive sentiment towards the US dollar.
The Week Ahead
AUS Trimmed Mean CPI
CPI or 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.
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. Germany is the largest economy in the Euro Zone and hence any unexpected development may induce volatility.
EUR Spanish 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. Spain is one of the larger economies in the Euro Zone and hence will likely wield some influence on the euro currency.
USA Core Durable Goods Orders
USA Durable Goods Orders
Industrial Orders serve as a leading indicator of economic activity. If orders are high, production will be increased. This flows downstream leading to employment, revenue and more.
USA Advance GDP
USA Advance GDP Price Index
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.
USA Revised University of Michigan 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 looming economic crisis.
There are many more events and hence it is important to follow an economic calendar so that 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 Price Action Bias Signals have been updated too.
Traders should always practice proper money management and seek to understand the underlying tones for the market.