EUR/USD AUD/USD Weekly Forecast 3 Jun 19


In the previous AUD/USD forecast, we noted that the currency pair was bullish for the week. While the consolidation brought about a higher price, it was important to note that the recovery did not bring the currency pair back to the vicinity of 0.7. This suggested that the upside pressure remained weak.

For the EUR/USD, we saw an attempt to breach 1.12. However there was no clear indication that the bearish momentum was over. The downside channel since the start of the year was still valid. Any bearish return would likely test the lower bollinger band.

AUD/USD Weekly Chart
AUD/USD Technical Analysis

Looking at the AUD/USD weekly chart above, we note a doji technical pattern which may suggest apprehension. The consolidation which we mentioned last week remained valid.

Referring to the yellow circle, the currency pair is now in the 0.68 – 0.7 region of price action. The longer the AUD/USD remains in this region without a successful breach of 0.7, the likely a new phase of price action has began.

In the upcoming week, the lower bollinger band will function as the immediate support followed by the significant sentimental and technical region of 0.68. Any attempt to regain higher ground will pit the momentum against 0.7.

EUR/USD Weekly Chart

EUR/USD Technical Analysis

Looking at the EUR/USD weekly chart above, we note that the currency pair was bearish for the week. Efforts to hold the 1.12 line failed. This is inline with our previous review’s assessment that the bearish undertone remains and as expected, the lower bollinger band functioned as a support.

Referring to the yellow line, we see a consistent clocking of lower highs by the EUR/USD. This is indicative of a bearish momentum. Having said so, we are not seeing an obvious trend of lower lows and hence close monitoring is required. If the top continues to slide while the bottom remains, a technical squeeze may occur.

In the upcoming week, the immediate technical regions of importance will be 1.12, followed by the middle bollinger band as a resistance and the lower bollinger band as a support.

US China Trade War

The tension between the US and China is rising. After the banning of Huawei by the US, China is taking a reactive approach and is producing a list of unreliable companies. Rhetoric comments continue to flood the market with apprehension and risk aversion.

The US President Trump said that the US is not ready to make a deal with China and that likely inflicted a significant amount of risk aversion.

At the Shangri La Dialogue, Chinese Defence Minister Wei Fenghe mentioned that his country remains open to talks with the US but will fight a trade war if this is the US’s choice of action.

Investors are sensitive to geo political developments as any changes may have significant impact on the various countries economies and currencies. For countries with economies closely linked, for example Australia and China, the impact is likely to be more pronounced.

European Parliamentary Election

A number of analysts felt that the European parliamentary election resulted in fragmentation. This seems to be correlated by the euro currency with it’s mixed price action. In fact long time readers will remember us mentioning a number of times that one of the main challenge of the Euro Zone is that it is a collection of economies with different challenges. This results in a challenging climate for policy makers as one size doesn’t fix all.

Australia’s Woes

Australia continues to produce disappointing economic data. Building Approvals which leads to construction and generation many economic activities came out worse than expected. It was reported to be -4.7%  instead of 0.1%. Private Capital Expenditure being business spending, functions as a leading indicator of economic activity. It came in at -1.7% instead 0.5%. These figures are suggesting a weak Australian economy.

In the upcoming Reserve Bank of Australia interest rate event, it is widely predicted that a interest rate cut will occur. This may further depreciate the appeal of the Australian dollar.

US Economic Steam Pushes On

Better than expected economic data continue to be released for the US. The US CB Consumer Confidence was reported to be 134.1 instead of 130.1. Consumer surveys are influential as the sentiment of consumers is a leading indicator of economic health. Personal Spending was also reported to be 0.3% instead of 0.2%. As consumers spend, it translates to revenue and flows upstream as salaries, wholesales purchase, production orders and so on.

A growing number of analysts are forecasting a significant impact on the US economy due to the protracted trade war with China. We are of a similar opinion that the trade war is affecting both the US and China. In fact the global repercussion has been significant. This week’s US Non-Farm Payroll event may provide some insights to the state of the US economy.

The Week Ahead

In view of the various high profile geo political challenges happening now such as the US China trade war and Brexit, price action may be largely driven by sentiment. This means that the direction and velocity may change at a moment’s notice. Proper money management should be always practiced and being on the side at times may be a good decision.

Find below a number of the expected economic events.

AUS Company Operating Profits
The earnings of businesses may provide insights into the state of the economy. For example dropping earnings suggest possible economic challenges.

Caixin Manufacturing 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.

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

USA ISM Manufacturing 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.

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

AUS Retail Sales
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.

AUS Current Account
As a measure of money, a rising surplus suggests that the local currency is in demand by foreign traders.

AUS Cash Rate
A high interest usually generates demand while a low interest may result in 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.

AUS RBA Rate Statement
Interest rate related statements are given much attention by analysts and investors as it has a direct impact on the currency. Investors usually favor a currency with a higher interest rate and will analyse these statements thoroughly for insights on the interest rate policy.

EUR CPI Flash Estimate
EUR Core CPI Flash Estimate
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.

AUS RBA Gov Lowe Speech
USA FOMC Member Williams Speech
USA Fed Chair Powell Speech
Speeches may contain a question and answer segment that at times go into unscripted territory and result in unexpected developments and volatility.

AUS 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.

USA ADP Non-Farm Employment Change
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 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.

USA ISM Non-Manufacturing 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.

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

AUS Trade Balance
Trade balance is a measurement on trade volume and net direction. Whether a country is net import or export is important. If more exportation is done, it is likely to be beneficial for the local currency as foreign companies usually buy with the local currency. This creates demand and adds bullish pressure.

EUR Monetary Policy Statement
Interest rate related statements are given much attention by analysts and investors as it has a direct impact on the currency. Investors usually favor a currency with a higher interest rate and will analyse these statements thoroughly for insights on the interest rate policy.

EUR Main Refinancing Rate
A high interest usually generates demand while a low interest may result in 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 ECB Press Conference
Press conferences often go into unscripted territory during the Question and Answer segment and hence may spur unexpected developments and volatility.

USA 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.

USA Average Hourly Earnings
USA Non-Farm Employment Change
USA 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. Volatility may increase during the Non-Farm Payroll event, especially when it is not as per expected.

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. The latest premium analysis and our popular Price Action Bias Signals are now available too.

You can also head to our latest feature, the Economic Fundamentals Center for information on the current interest rates and unemployment rates of the countries covered in our analysis of currency pairs.

Traders should always practice proper money management and seek to understand the underlying tones for the market.

Have you checked out our membership subscription? Enjoy your own member dashboard with exclusive premium analysis for as low as less than $0.20 a day! Time Limited Promotion 30% OFF. Secure Discounted Rates Now.
Now enhanced with our proprietary Price Action Bias Signals.
Find Out More We think you may be interested in these articles.