EUR/USD AUD/USD Weekly Forecast 8 Jul 19


In the previous weekly forecast of AUD/USD, we noted that the currency pair had managed to breach major sentiment and technical region of 0.7. The week ahead would be crucial as it was not yet to be seen if the AUD/USD would be able to remain above 0.7. It would be good to note that the middle bollinger band ahead might function as an immediate resistance.

For the EUR/USD, we observed that the currency pair had failed to close above the major technical and sentiment region of 1.14. The Price Action Bias Signal was spot with it’s forecast of a neutral bias for the currency pair as the week ended as a doji. It appeared that traders might be apprehensive. Any bullish attempt would need to overcome both 1.14 and the upper bollinger band.

AUD/USD Weekly Analysis
Looking at the AUD/USD weekly chart above, we note that the middle bollinger band had indeed functioned as a resistance as per our previous forecast. Over the years, our observation suggests an important role for the bollinger bands in our analysis.

With the currency pair slipping below 0.7 again, it is important that we be mindful of the bearish undertones. Continued bearish pressure will see the lower bollinger band followed by 0.68 as supports.

If a bullish recovery happens, 0.7 will likely be the immediate resistance, followed by the middle bollinger band.

EUR/USD Weekly Analysis
Looking at the EUR/USD weekly chart above, we note that the currency pair did not manage to reach 1.14. It tested the strong sentiment and technical region of 1.12 before easing off to the upside.

The EUR/USD is now within a narrow channel where the possible resistance is the middle bollinger band and where the possible support is the 1.12. 1.14 and the lower bollinger band will likely be the extended resistance and support respectively. We need to be mindful that there is no strong indication that the bearish momentum from 2018 is over. Any bullish advancement may be a consolidation and hence proper money management is of upmost importance.

RBA Cuts

The Reserve Bank of Australia has cut the cash rate to a historical low of 1%. While equities may be urged by the cheaper funds, currency investors may not fancy the development. Usually, demands are for currencies with higher interest rates. Keeping this in mind, we may be seeing some weakness of the Australian dollar in the weeks ahead. In fact, there are speculations that a further cut may bring the rate down to 0.75%

US Non-Farm Payroll Pleases The Market

The US NFP came in better than expected. 224k jobs were created instead of the forecast of 162k. 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. Therefore with this upside surprise, positive sentiment towards the US dollar should have increased. Although the unemployment rate crept up to 3.7%, the market mostly shrugged it off. In our premium analysis, it is evident as all currency pairs in our coverage went in favor of the US dollar on the US NFP day. As a result of the better than expected US NFP, a number of analysts believe that a 0.5% cut to the US interest rate is virtually impossible.

ECB Quantitative Easing Continuation

It was reported that IMF’s Christine Lagarde would likely replace Mario Draghi. Speculations are that she will probably continue the general direction of the current leadership which is a loose monetary policy to sustain the euro’s economy. If indeed, with the continuation of the quantitative easing pressure on the euro currency, we may see a period of weak outlook.

The Week Ahead

The week ahead brings many speeches from various officials. Any deviation from expected norms may trigger price action, especially if it is unexpected. Proper money management is a must.

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

AUS Westpac 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.

CNY 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.

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

USA FOMC Meeting Minutes
EUR Monetary Policy Meeting Accounts
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.

USA CPI
USA Core 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.

AUS RBA Assist Gov Debelle Speech
USA Fed Chair Powell Testimony
USA FOMC Member Quarles Speech
Speeches may contain a question and answer segment that at times go into unscripted topics and result in unexpected developments and volatility.

USA PPI
USA Core PPI
PPI or Producer Price Index is important because the price of goods sold by producers influences the downstream impact of inflation. If inflation is high, a central bank may increase interest rate to mitigate the situation.

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.

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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.

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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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