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EUR/USD AUD/USD Weekly Forecast 4 Nov 19

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In the previous AUD/USD weekly forecast, we noted that the currency pair fail to breach the strong sentiment and technical region of 0.68. Price action was likely sentiment driven as the week was light on economic data. US and China’s trade negotiations continued to exert a significant influence on the currency pair.

Previously, the EUR/USD closed the week below 1.11 and should there be bullish recovery for the upcoming week, the currency pair might hit resistance at 1.11 and the middle bollinger band. Economic data from the euro zone was mixed.

AUD/USD Technical Analysis

Looking at the AUD/USD weekly chart above, we note that the currency pair has managed to breach the middle bollinger band. While it closed the week above 0.69, support and resistance lines are usually not a line of single pip but rather a zone of influence. It remains to be seen if the AUD/USD will remain above 0.69.

If bullish momentum continue, the strong sentiment and technical zone of 0.7 will be the target.

Any return of bearish pressure will see the AUD/USD take on the middle bollinger band again followed by 0.68.

EUR/USD Technical Analysis

Looking at the EUR/USD weekly chart above, we note that the currency pair has managed to breach the middle bollinger band. Having said so, it failed to test the strong sentiment and technical region of 1.12. It is important to note that the currency pair has tried to breach this resistance a number of times now.

In the upcoming week if bullish momentum continues, we are likely to see an attempt to test and hold 1.12. Beyond that lies the target of 1.13, followed by the upper bollinger band / 1.14.

A return of bearish pressure will probably face the middle bollinger band as a resistance turned support, followed by 1.11 and 1.1.

Risk Sentiment Improves

While there were a number of worse than expected economic data such as the USA CB Consumer Confidence, risk sentiment likely improved as some optimism emerged with the Brexit extension deal. Focus is likely to shift away further with the upcoming UK elections. Having said so, this is akin to kicking the can further down the road, the Brexit challenge will return in time to come.

Australia’s Building Approvals came out much better than expected. It was forecasted to be 0.1% but came out 7.6%. 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. This result likely pumped fresh optimism into the markets.

US Feds Moves For Now

The US Federal Reserve cuts the interest rate to 1.75%. Having done so, there are a number of analysts who believe that this may be all for now as the Fed Chairman was reported to have commented that ” the current stance of monetary policy as likely to remain appropriate as long as incoming information about the economy remains broadly consistent with our outlook ” While this may lead to a demand for US dollar, the immediate impact is from the easing of interest rate which likely translated into increased risk appetite.

US Non-Farm Payroll Double Delight

The US NFP came out better than expected. It was expected to be 90k but came up higher at 128k. September’s figure was also revised upwards to 180k. Employment is a fundamental component of the economy as it leads to consumer spending and hence retail sales. The positivity of this report likely increased risk appetite even though unemployment went up to 3.6% as expected. This is clearly seen in our premium analysis for the US NFP.

The Week Ahead

The Australian interest rate event is due next week. Latest reports suggest that the market has low expectations of a rate cut. Any unexpected development will likely inject volatility into the market.

There are many more important economic events.

EUR ECB President Lagarde Speech
USA FOMC Member Evans Speech
USA FOMC Member Williams Speech
USA FOMC Member Brainard Speech

Speeches may reveal new insights to economic policies or contain a question and answer segment that at times go into unscripted topics resulting 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 RBA Rate Statement
AUS Cash 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 ISM Non-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.

USA Crude Oil Inventories
Movement of oil supply may bring insights to the level of general economic activities. For example, an increasing supply may suggest excessive production or diminishing demand. A reducing supply on the other hand may suggest an economic pick up.

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 EU Economic Forecasts
Economic forecasts are important and monitored by traders and analysts. The idea is to obtain insights to possible future economic polices and conditions. Volatility may increase, especially when the actual data is not as per expectations.

AUS RBA Monetary Policy Statement
Monetary policy meeting minutes 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 Prelim 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.

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

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