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EUR/USD AUD/USD Weekly Forecast 27 Apr 20

In the previous AUD/USD weekly forecast, we saw the currency pair ended the week slightly bullish. This was despite the general US dollar strength for the week. If bullish momentum continued, 0.64 should be clearly breached before we could expect any sustainable attempt on 0.65 and the strong sentiment and technical region of 0.66.

In the previous EUR/USD weekly forecast, we observed a bearish week for the EUR/USD. The currency pair had tested both the support of 1.08 and resistance of 1.1. It remained unclear whether a pivot could develop around 1.1 as bullish pressure was lacking. If the EUR/USD continued to range between 1.08 and 1.1, we might be seeing a formation of a consolidation channel instead.

Technical Analysis

audusd weekly forex forecast chart

Looking at the AUD/USD weekly chart above, we see a bullish week for the currency pair. Having said so, the push to breach 0.64 did not materialize. This is significant as sentiments will change based on what unfolds on the chart. If the currency pair continues to fail in it’s attempt to break above, more downside pressure may appear.

If the bullish momentum succeeds in clearing 0.64, we will likely see the next resistance at 0.65 followed by the middle bollinger band / 0.66.

A bearish recovery will see the AUD/USD testing possible supports at 0.63 and 0.62. If this happens and the currency pair remains above 0.62, there is a possibility that we are seeing a development of a consolidation channel between 0.62 and 0.64.

eurusd weekly forex forecast chart

Looking at the EUR/USD weekly chart above, we observe a bearish week for the currency pair. The currency pair tested the strong sentiment and technical region of 1.08 but failed to move beyond that. As the EUR/USD continues to show little bullish pressure, the pivot of 1.1 may not take place if this situation continues.

A look at the general trend of the EUR/USD indicates that the possibility of the long term bearish channel remains. This is evident as per the arrow in the chart. The support of 1.08 will be a main deciding factor for the currency pair. If it is breached, the lower bollinger band and 1.07 will likely function as supports. A lower low than the one clocked in March will be a favorable sign that the bearish momentum may continue.

If a bullish recovery takes place instead, we expect possible resistances at 1.09 and 1.1 / middle bollinger band. Any incursion above 1.11 will swing us back to the possibility of a pivot.

Fundamental Analysis

COVID-19 Coronavirus Crisis Continues

The COVID-19 coronavirus continues to spread globally and yields a significant influence on global economics. It appears that the general sentiment has shifted from prevention to one of containment and management. Countries, industries and businesses are navigating this new economic challenge which remains very fluid. Apprehension towards the initial impact is giving way to an apprehension of what is to come. This is important for our forex trading as sentiment often dictates short term price action. This will unfold as economic data releases get reported over the coming weeks and months.

Australian Dollar Continues The Ride For Now

The perception of a Chinese economy that is past it’s worse continues. This has likely led to the continuation of an increased positivity towards the Australian dollar as China is an important economic partner of Australia. We remain cautious about any expectations as the economic situation is still fluid. Any surprise deterioration will possibility trigger volatility and downside risk. An important point to note is that the currency pair is facing resistance repeatedly at 0.64 and whether that holds is a key to more insight on where this is going.

US Unemployment Claims Remain A Risk

The US Unemployment Claims came out to be worse than expected at 4427k instead of 4350k. The situation continues to paint a bleak outlook and many analysts are cautioning on the employment impact and a possible sharp increase in the unemployment rate. Employment is crucial to an economy as it directly translates to spending and consumption. A dire employment environment will likely send ripples upstream and impact the economy.

Euro Mixed And ECB Eased

Despite a much better than expected German ZEW Economic Sentiment, which came out to be 28.2 instead of -40, the euro currency did not find an upside shift. 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. With Germany being a core member of the euro zone economy, this positive development should have lifted the euro currency.  This suggests that investors are likely risk averse and interpreting this as just a blip instead of a renewed optimistic drive. In fact, Euro Zone PMIs released later in the week were indeed all worse than expected. The sentiment of purchasing managers is a leading indicator of economic health and this worse than expected turn out likely increased negative sentiment towards the Euro Zone.

The European Central Bank launched new temporary easing measures to mitigate the economic fallout of the COVID-19 pandemic crisis. At a fundamental level, any economic market is all about supply and demand. With an increase in the supply of funds, this will inevitably add downside pressure on the euro currency. In our premium analysis of forex sentiment, we see an increasing number of short positions for the EUR/USD and are monitoring it closely. Members should log in to their dashboard to view the latest analysis.

The Week Ahead

There are a number of important economic releases and events for the week. Any development that may lend weight to the current apprehension may further add to the sentiment and increase the intensity of it. You can find a number of them listed below. ( Not in chronological order )

EUR Spanish Unemployment Rate
USA Unemployment Claims
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.

USA CB Consumer Confidence
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 CPI
AUS Trimmed Mean CPI
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. Speculations of a possible interest rate hike may generate demand for the currency.

USA Advance GDP
EUR French Flash GDP
EUR Spanish Flash GDP
EUR Prelim Flash GDP
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 and thus wields influence on the home currency.

USA Advance GDP Price Index
The GDP Price Index is important because it is a measurement of inflation. If inflation is high, a central bank may increase interest rate to mitigate the situation. Speculations of a possible interest rate hike may generate demand for the currency.

USA Pending Home Sales
The purchase of a house results in economic activities. Renovation jobs will be created for construction workers, the various sub contractors and services associated with new ownership such as power, water, furniture and so on.

USA FOMC 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.

USA Federal Funds 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.

USA FOMC Press Conference
Press conferences may go into unscripted territory during the Question and Answer segment and hence may spur unexpected developments and volatility.

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 Personal Spending
While Personal Spending is similar to Retail Sales, it focuses on consumers. It is a fundamental component of the economy because as consumers spend, it translates to revenue and flows up stream as salaries, wholesales purchase, production orders and so on.

USA Chicago PMI
USA ISM 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.

The Bottom Line

It is important to follow an economic calendar as your forex trading plans may be impacted due to shifting sentiments. Members do log in to your dashboards for the economic calendar. You should also review the latest Major Currency Pairs, USD Index, Gold and Brent Oil analysis to complement your forex trading plan.

It is important to conduct defensive forex trading ( proper money management, realistic stop loss and take profits, etc ) as sentiments may shift in an instant from unexpected developments, resulting in a corresponding shift in price action.

Traders should always practice proper money management and seek to understand the underlying tones for the market. May the pips be with you!

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