EUR/USD AUD/USD Weekly Forecast 27 May 19


In the previous weekly forecast, we noted that the AUD/USD was bearish for the week. The momentum was strong and drove the currency pair on an approach for 0.67. This was not unexpected as we had mentioned of the lower highs. As of all significant momentum, there might be some consolidation but we reminded on the need to plan carefully to avoid trying to “catch a falling butter with a knife”.

The EUR/USD was bearish for the week and taking reference from the gradual slope of the currency pair, we were of the opinion that the long term downside momentum was probably not over.

AUD/USD Weekly Chart

AUD/USD Technical Analysis

Looking at the AUD/USD weekly chart above, we note that the currency pair was bullish for the week. As mentioned previously, the strong momentum of the bearish drop did give way to consolidation. An important point to note is that the recovery did not bring the currency pair back to the vicinity of 0.7. This suggests that the upside pressure remains weak.

In the week ahead it becomes ever more important to monitor the lower time frames. In shorter time frames, price action is often sentimental in nature. This means that direction and velocity may change in an instance. The immediate resistance will be the strong sentiment and technical region of 0.7. A return of downside pressure will see 0.69 followed by 0.68 function as supports.

EUR/USD Weekly Chart

EUR/USD Technical Analysis

Looking at the EUR/USD weekly chart above, we see an attempt to breach 1.12. Compared to the AUD/USD, we see a stronger upside push in this currency pair. Relatively, this suggests that the upside pressure is significant. Having said that, there is still no clear indication that the bearish momentum is over. The downside channel since the start of the year remains intact.

In the week ahead, we need to observe if the strong sentiment and technical region of 1.12 retains it’s influence as a pivot. If so, we will see a swing to the upside and the middle bollinger band will likely provide resistance. Should the bearish momentum return, we will possibly see a test of the lower bollinger band.

Australia’s Construction Lag

The Australian Construction Work Done data was much worse than expected. Instead of the expected 0.1%, a negative 1.9% was reported. Construction is a sizable industry and hence this data provides insights into the level of economic activities. Lesser construction work being done may be an indicator of a challenging economic climate.

Euro Zone Mixed Signals

The economic data coming out from the Euro Zone was mixed. While we have French services and manufacturing surveys coming out better than expected, German’s surveys were worse than expected. The German Ifo Business Climate also came out worse than expected at 97.9 instead of the forecast of 99.2. This data is influential as the sentiment of businesses is a leading indicator of economic health.

In the European Central Bank meeting minutes that was released, we are given access to a picture of concern that the economic growth in the euro zone may be even weaker than it seems. The officials are not as confident as before of a recovery in the second half of the year. It is also noted that external factors beyond the influence of the central bank such as Brexit and the US China Trade War form the bulk of challenges. This will be challenging to navigate in the road ahead.

US Dollar Crash

While the US Durable Orders came out slightly weaker than expected, talk in the market is pointing to a bigger contributor to the US dollar weakness towards the end of the week. A number of analysts are of the opinion that the actions taken by the US with regards to the trade fall out is causing concern and apprehension in the market. While such risk aversion usually results in a rise of value for assets commonly deemed “safe”  such as the US dollar or Gold, apparently the concern is so much so on the US that the US dollar is taking a hit. The S&P 500 is also down for the week. On the other hand, Gold has risen from $1277.39 to $1284.49 week on week.

The Week Ahead

US 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.

EUR German Buba President Weidmann Speech
Speeches may contain a question and answer segment that at times go into unscripted territory and result in unexpected developments and volatility.

AUS Building Approvals
The construction of a building generates many economic activities. Jobs will be created for construction workers, the various sub contractors and services associated with new buildings such as power, water, furniture and so on.

AUS Private Capital Expenditure
Business spending serves as a leading indicator of economic activity. If spending is high, downstream activities such as employment may rise. On the other hand if spending drops, it will be an indicator of a challenging economic climate.

US Preliminary Gross Domestic Product
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.

US FOMC Member Clarida Speech
Speeches may contain a question and answer segment that at times go into unscripted territory and result in unexpected developments and volatility.

CNY Manufacturing PMI
CNY Non-Manufacturing PMI
Purchasing Managers’ Index is a survey of purchasing managers and it 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.

EUR German Preliminary 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.

US Core PCE Price Index
While the Personal Consumption Expenditures index is similar to Consumer Price Index, it focuses on individuals. It is a component of inflation and if inflation is high, a central bank may increase interest rate to mitigate the situation.

US 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.

US Chicago PMI
The 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.

US Revised UoM 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 upcoming economic crisis.

US FOMC Member Williams Speech
Speeches may contain a question and answer segment that at times go into unscripted territory and result in unexpected developments and volatility.

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.

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