In the previous weekly forecast, we noted that both the EUR/USD and AUD/USD were testing significant resistances. It remained to be seen if the currency pairs would succeed in establishing a foothold.
The week brought about a break in escalating tension between the US and China. China announced an exemption of 16 US products from new tariffs until September 2020 while US President Trump also delayed a 5% increase in tariffs for two weeks. It was initially scheduled to start on 1st October. It was likely due to the positive developments that risk appetite picked up in the markets. Having said so, sentiment could change quickly.
Looking at the AUD/USD weekly chart above, we observe a bearish week. The price action is significant as it successfully tested and closed below 0.68 for the week. As mentioned previously, the 0.68 region is a significant sentiment and technical level. In the upcoming week, we will need to monitor closely to see if there will be a revival of bullish momentum to retake 0.68.
If bearish pressure continues, we will likely be looking at a test of the lower bollinger band and 0.67.
Looking at the EUR/USD weekly chart above, we observe a bearish week too. Having said so, the test of the significant sentiment and technical region of 1.1 failed. The currency pair has since eased towards the upside.
In the coming week, a continuation of the bearish pressure will see a retest of the 1.1 region. We previously explored the possibility of a pivotal consolidation. It will be prudent to monitor the price action on shorter timeframes. Beyond 1.1 lies the lower bollinger band.
A return of upside recovery will likely test the resistance of 1.11 followed by the middle bollinger band / 1.12.
Price Action Bias Signals Delight
Our Price Action Bias Signals for the week was right on point for the AUD/USD and EUR/USD. Both currency pairs received slightly bearish bias signals. We hope our members made good use of the signals! Having said so, we need to always be mindful that nothing in forex is 100%. The PABS serves as a supplement to our forex trading plans rather than dictating them.
You can read about our recent performance review of the PABS and consider becoming a premium member at less than $0.20 a day! We feature a 10 days money back guarantee.
RBA, Unemployment, Economic Woes
In the monetary policy minutes, the Reserve Bank of Australia indicated that it would consider further policy easing if necessary to support growth. A long period of low interest rates would be acceptable if employment and inflation objectives needed support.
Towards the end of the week, the Australian unemployment rate was released. It came out worse than expected, reporting 5.3% instead of 5.2%. With the policy minutes fresh in mind, it is likely that traders are pricing in the possibility of an interest cut, further adding bearish pressure.
US China Trade Dance
President Donald Trump commented that China’s move to increase agricultural purchases would not be sufficient for an agreement. He was looking for a “complete deal” and also felt he need not push for a deal before the 2020 Presidential election. This development probably increased negative sentiment, resulting in a pull back from risker assets such as the Australian dollar and Euro.
US Fed Cuts
The US Federal Reserve Bank had cut the Federal Funds Rate from 2.25% to 2% as expected. Chairman Powell gave a rather flat outlook for the path ahead and this likely resulted in some relief for the US dollar. Other Fed officials also mentioned that the US economy did not require additional stimulus and the cut was more of a preemptive move against downside risks.
Germany Surprise But Pessimism Remains
The German ZEW Economic Sentiment came out much better than expected. It reported -22.5 instead of -38. Having said so, it is important to understand that any figure below 0 reflects pessimism. Therefore, the German economy remains challenged by the prevailing conditions. Being the largest economy in the Euro Zone, sentiment towards the region will likely be affected.
The Week Ahead
There are many important economic events in the coming week for the AUD / EUR and USD. It is imperative that you practice proper money management so that any unexpected developments may be mitigated. In shorter time frames, price action is often sentimental in nature. This means that price action may change suddenly without warning.
Following an economic calendar is vital too so that your forex trading plan factors in the events. Members can log in to their dashboard for a economic calendar. The latest Major Currency Pairs, USD Index, Gold, Crude Oil and Price Action Bias Signals analysis are available too.