It is time to review the week’s developments and to discuss the possibilities for the week ahead.
In the previous AUD/USD forecast we noted that the currency pair was bullish for the week. The middle bollinger band could offer some resistance. It was just below 0.72. The bollinger bands were also flattening and suggested a possible period of consolidation.
For the EUR/USD, we noted that the currency pair was bearish for the week. It tested the lower bollinger band and was rejected. 1.12 could be a strong support.
AUD/USD Technical Analysis
The AUD/USD was slightly bearish for the week. The middle bollinger band and 0.72 were indeed a strong resistance region. In the week ahead we may see continued consolidation as the currency pair continues to find it’s bearing unless any major development occurs.
EUR/USD Technical Analysis
As per our comments last week, the bearish momentum fizzled out in view of the strong support. It was slightly bullish but remained well within limits of 1.12 and 1.14. The EUR/USD may continue its consolidation if there are no major developments.
The US dollar is facing a number of challenges. The US Federal Reserve has taken up a dovish stance, abandoning it’s path of interest rate hike. With the expectation of hikes out of the way, the incentive to hold US dollars for the interest advantage is diminished.
US Debt Concern
Another challenge would be amount of debt the US is in. It has recently passed $22 trillion and an increasingly number of analysts are warning of an inability to react to any new recession due to the high debt level. By extension this may affect the market’s confidence of the dollar.
Our readers who have being following us for some time will be familiar of the connection between the Auatralian and Chinese economy. This will now and in the foreseeable future be an influence of the Australian dollar unless the Australian economy reduces it’s dependency on China. The Chinese economy is slowing down, inevitably adding some drag to the Australian economy.
Lack of the Euro Shine
Depsite the impact on the US dollar after the Feds dovish stance, the Euro has not gained versus it. In fact it is still hovering at the lows and this suggests inherent weakness for the Euro. In essence a monetary union of economies with different situations will present unique challenges.
We have a number of important economic data releases due this new week. Having said so, the US Non-Farm Payroll is scheduled for the following week.
The US Fed Chair Powell is due to testify to the Senate and House. As there will be question and answer segments which are not scripted, any unexpected developments may trigger volatility. As always, proper money management is crucial.