Big money has been moving out of Australia's currency for nearly a month now which has been the biggest drop in long contracts in this amount of time year-to-date. Australia's dollar index (AXY) is up 0.06% at 73.61 on the day after rebounding from the lows around 71.19.
Australia's economy has surprised investors with a beat in GDP and jobs numbers in the most recent reports. Having said that, institutions have been selling out of the buck for about a month now at an alarming rate which is rather concerning for the average investor. A little while back, I argued that Australia had a good chance for rebounding in this article. Price jumped over 2% in the next few days after that article, but the run was very short term. AUD/USD rose after a good GDP, but it couldn't maintain itself above the 0.74200s and put the pair in a state of consolidation. So until big money changes their sentiment toward the currency, I think it would be best to stay away from long plays and look to ride the momentum to the downside. Long term, the currency looks like a good long play, especially if they keep reporting good jobs numbers. But right now it's struggling with massive futures contract selling that will most likely continue to put pressure on the buck.
This pair fell back under the 0.74200s and is now riding the 50 DMA on the 1D chart. It looks like price will either consolidate between these two levels of support and resistance, or it will slowly bleed lower under support. In the past, this pair has historically made extended losses after a short rise in price according to this year's performance.
AC broke out of a long term channel and is now hovering at the top trend line on support. If momentum is strong enough, it could come up to test the previous high at 0.94185. Some bullish signs here on the 1D chart, but if it does end up moving bearish, we could see a test on support around the 50 DMA.
AUDCHF actually looks the most bullish out of these pairs right now. Price is bouncing up from the 50 DMA and testing support which is now a triple top on the 1D. If there is enough strength, price could come up to a falling trend line around .68495.
Let's look at the news event's we've got lining up this week...
The Reserve Bank of Australia is expected to keep interest rates on hold at 0.10% this week at their Rate Statement. We may see some negative remarks considering the number of states placed back in lockdown over the past month.
Also, note that the GDP fell short of expectations in Q2 slowing from the previous expansion at 1.9% to just 0.7%; although the unemployment rate declines, it was mostly due to a fall in labour force participation. With this, policymakers may delay their tapering plans as they cited they will adjust to any "significant setback" for the economy.
No interest rate changes are expected from the Canadian central bank, and officials will likely standstill ahead of the national elections after seeing the unexpected 1.1% contraction in Q2 GDP. Also, note that number crunchers are predicting a monthly GDP contraction for July mostly due to the disruption in the auto industry supply chain and weaker residential investment.
The European Central Bank is also expected to keep rates and bond purchases unchanged. Analysts are divided on whether or not the central bank will be making tapering plans, as the PEPP is scheduled to finish in Q1 next year. Scaling down the size of the purchases could make for a smoother transition to their regular QE program, but policymakers might still decide to defer any actual decision until later this year. Also, any significant revisions to growth and inflation forecasts at this time could impact taper speculations.
The Employment Change report is a measure of the change in the number of employed people in Canada. Job creation is an important leading indicator of consumer spending, which accounts for a majority of overall economic activity. The number of unemployed people is an important signal of overall economic health because consumer spending is highly correlated with labour-market conditions.
Job creation is expected to show a slower 75k gain in hiring versus the earlier 94.5k increase, which should be enough to bring the unemployment rate down from 7.5% to 7.3% in August.
The buck has considerably struggled this year as the economy keeps lagging on government-issued lockdowns and economic pauses in already-slowing business throughout the country. However, Australia's most recent unemployment rate came out beating expectations by 0.4% despite the lockdown.
Tomorrow's GDP will cause some volatility for the AUD pairs, and this week's GDP is expected to be lower than the previous report. But the fact that the expectations are much lower than last report suggests that we are not expecting much growth in the short term, but that doesn't change the fact that the numbers have showed us that Australian citizens are finding more jobs than expected. Investors may look past GDP news this time and keep the anticipation that the buck will gain strength on the increasing number of jobs.
AUDNZD may have bottomed here on the daily chart after the pair hit a December 2020 low. Price action in the past couple days suggests that price wants to bounce back, and a change in direction to the upside could take it to resistance around 1.05033.
AUDCHF had already bounced from the lows and is testing resistance at .67158. If price fails to break above, it doesn't have clear support until the lows at .65159. A break higher could take the pair to .67804.
AUDJPY broke above a falling trend line on the 1D chart and is testing resistance now. If momentum can move price higher, it would have to break a double top around 81.300s. If price fails to break above this resistance level, it could find support around the falling trend line.
Australia's currency has declined a little over 10% since the beginning of March over various economic and fiscal factors. The country's reserve bank decided that they will not increase interest rates anytime soon as they are waiting for the economy to show some improvement with jobs and growth. Sydney's lockdown has also been extended for another month as cases generate 642 new ones in New South Wales. Despite all of this, Australia's economy was able to add a positive number of jobs this week at +2,000 new jobs, while expectations were -42K.
I think this hard-hitting news of another extension to this lockdown is going to be bearish in the short term. However, I think there could be some bullish potential next week if price begins to stabilize. COT will also be a big factor in deciding whether the buck could be a buy or not. So far, the number of short, non-commercial positions has increased sharply since June. Watching price action next week on the higher timeframes (1D chart) and the COT report this week will be imperative in the buck's direction.
AU on the 1D chart gapped lower today after the Australian government decided to extend their lockdown to another month. Potential support lies further below around .70208.
AUDCHF hits support on the 1D chart around .65092 and looks like it could be rejecting the lows. If price can't maintain above this level, further support lies underneath around .63800s.
AUDNZD also showing signs of bottoming out here on the 1D chart. Price came down to hit the 1.04163 level and bounced. Judging by the current support and resistance levels, price could be in consolidation for the time being.
Let's look at the news event's we've got lining up this week...
The USD Retail Sales Report is set for Tuesday which shows the total value of sales at a retail level. Consumer spending accounts for a majority of economic activity, and therefore when citizens spend, it is a sign that people have jobs, people are making money, and people are able to spend money for whatever it is they want.
Analysts expect to see a 0.2% decline in the USD Retail Sales compared to the previous month at 0.6%. The Core reading is expected at a minor 0.2% increase after the previous reading at 1.3%. This report will likely paint a mixed picture of consumer spending, so I suggest looking at the data once released before making any trading decisions.
This week, all eyes are on the RBNZ as the central bank is widely expected to hike rates from 0.25% to 0.50%. These hawkish expectations are supported by stronger than expected quarterly inflation and employment figures, as New Zealand has been weathering the pandemic far better than any of its peers. Keep in mind that the RBNZ has already committed to scaling back its easing program in July, suggesting that policymakers are keen on keeping price pressures in check.
This release should shed more light on whether policymakers are shifting to a more optimistic stance or not. In their latest statement, the Fed refrained from giving a timeline for tapering asset purchases, citing that they need to see "substantial further progress has been made toward its maximum employment and price stability goals” before making adjustments".
The Employment Change report is a measure of the change in the number of employed people in Australia. Job creation is an important leading indicator of consumer spending, which accounts for a majority of overall economic activity. The number of unemployed people is an important signal of overall economic health because consumer spending is highly correlated with labour-market conditions.
Job creation is expected to decline by 46k in July after the previous month where we saw job creation of 29.1k. This might be enough to move the unemployment rate up to 5.0%.
Hey everyone! Welcome to this week's forex forecast for the week ending August 20th, 2021. I'm TraderBart with A1 Trading, and this week I'll be looking at EURUSD, GBPNZD, EURAUD & XAUUSD.
A bearish flag pattern has formed on E/U after a descending channel has formed following an impulsive selloff in mid-June. Price has recently hit the channel's bottom and is now more than halfway heading towards the channel's top. We have a bearish order block at 1.187, where we could likely see a reversal towards the bottom from this zone. Look out for price action confirmations once price does reach this zone, look out for rejections before going short.
Price has been consolidating around and within this bullish breaker block zone for months now, and no significant move has yet to be made. Price did form a medium-term ascending channel where it's currently at the bottom, and I'm now waiting on price action confirmations of a rejection and a move potentially to the upside. If price breaks this formation and goes lower, it's likely we could see a new trend form, or price may go to retest previous horizontal levels such as 1.92 or potentially collect orders from OB's lower.
Price has recently broken out of the short-term ascending channel and is potentially forming a new descending channel if price fails to go higher than 1.61, forming the new lower high. Price has been moving pretty slowly in this market, and no breakthroughs have happened. 1.585 is a pivotal level to watch how price reacts; a break lower suggests we could retest 1.568, whereas if price holds this level as support, price is likely to stay above, and long positions could be a good idea.
Gold made a huge move in the past week, dropping more than 5% and then retracing the entire move plus more by Friday. Price has closed off for the week just above the channel's top, and in-between two horizontal levels, I've had my eyes on 1765 and 1795. Look out how price reacts to this current level to decide whether to go long or short. If price stays above the channel's top, we could likely see price head higher towards and above 1795, whereas if price comes back inside the channel, it's likely we could see some consolidation in the zone at 1740.
The Australian military was sent to enforce a lockdown in Sydney where residents are forced to stay inside for an extended period of time as cases spike. This quarantine period has been scrutinized because of their failure to contain the number of cases while people are inside.
The fact Australia has to shut down again is a good thing for public health but not for the economy and the buck. Although the US dollar looks weaker after the Fed news on Wednesday where they said interest rates will stay low for a long time and tapering will not happen any time soon, Australia's economy is taking a step backwards. Against most major currencies, the buck now looks much weaker.
AUDNZD fell under the lows on the 1D chart and now could be heading towards further lows around 1.04299. If price does bounce at this level, we could expect a lower high to form on the daily chart.
AJ retraced off its 200 DMA paired with a resistance level which looks like a tough level to break above. The pair tried to test it a second time but ended up coming back down again. If the pair makes a lower low on the 1D, it could signal more of a bearish move next week.
AC broke under support on the 1H and 4H timeframes and tried to test that level before pulling back again. Price is currently on long term support from November of 2020, so a break under this level would probably mean a drop to the .90637 level.
This pair looks increasingly bullish on the 4H as price hits higher lows and highs while forming a stairstep upward. Support around 1.61002 should price dip before attempting a higher high. The pair's recent break above its long term channel is also a bullish sign for the pair.
Let's look at the news event's we've got lining up this week...
The quarterly AUD Consumer Price Index (CPI) report is releasing on Wednesday, which measures the change in the average price basket of goods and services by consumers, which can be anything from food, transportation and medical care. Changes in the CPI are used to assess price changes associated with living in the country. It is one of the most used statistics to identify periods of inflation or deflation.
Analysts expect a pickup in price pressures to advance from 0.5% to 0.6% and the trimmed mean CPI to jump from 0.3% to 0.5%. However, with what's going on currently and the ongoing set of lockdowns caused by the Delta variant, this may not life Aussie traders' spirits.
No interest rate changes are expected from the Central bank, and the Fed Chair Powell will likely downplay the pickup in inflation.
Pressure is still continuing to grow on policymakers to start tapering assets since the economy has been recovering. Any indication that the Fed is closer to scaling back their stimulus could be bullish for the USD.
Strong growth figures are expected for the previous quarter, and the economy is likely to grow by 8.5% in Q2. Since most companies and businesses have reopened again over the past couple months, this has spurred consumer activity and investments.
A better than expected headline could reinforce Fed tightening hopes while a worse than expected headline could encourage doubts on seeing tapering moves in the near future.
The Core Personal Consumption Expenditures (PCE) Price Index is releasing on Friday and it reflects changes in the prices of goods and services purchased by consumers in the US.
Another pickup in inflation is expected, and we're looking to see the reading pick up from 0.5% to 0.6% in June. This is the Fed's preferred measure of inflation, and hence should be a very big deal!
Hey everyone! Welcome to this week's forex forecast for the week ending July 30th, 2021. I'm TraderBart with A1 Trading, and this week I'll be looking at USDJPY, EURAUD, NZDCHF & XAUUSD.
Price has recently broken out of the ascending channel, and we've already seen a retest and the impulsive move to the downside. However, we're once again seeing price approach the channel's bottom and nearing short-term resistance at 110.6. Look out in the week ahead for price to either break through this level, where it will likely continue travelling inside the channel. However, if we see price fail to break this level and instead reject, we could likely see a new trend form to the downside as this could potentially be the next lower high.
Price has closed off for the week touching and retracing the channel's bottom. Now that price has broken out of the consolidation phase following the ascending channel break, it's likely we could see this ascending channel continue as price heads to new highs to complete the long-term ascending channel pattern. We may get a much clearer touch of the channel's bottom before this move happens, so look out for proper touches and rejections before going long on this pair.
Price is now touching the descending channel's bottom and is already showing rejection to this level. If price continues to fail to break above, this could be a good position to go short. However, this may not be the best idea as looking overall and long-term, price is actually travelling in a bullish flag pattern, and we're currently in the flag, the position right before the impulsive upside move of the chart pattern. If we see price break above the channel, we'll likely see price head higher and complete the chart pattern.
Price is consolidating above the descending channel's top and is currently waiting on some sort of catalyst to make the next month. If price continues to stay above the channel, we will likely see price be bullish and travel higher towards the Liquidity Void at around 1900. However, if price closes back inside the channel, we'll likely see a retest of the bullish OB at around 1750.
Although both currencies are affected by global events for the most part, the Aussie buck is probably a safer bet considering a few factors around it. First, the buck relies heavily on gold production and is dependent on it performance in the Australian economy. The kiwi is mostly dependent on manufacturing and exporting commodities like milk and dairy products. If there is a slowdown in dairy production or the prices of dairy products declines, so does the kiwi's price.
The continuing decline of whole milk prices since March is not a good sign for New Zealand's economy, and when comparing them to other countries' currencies, they don't really have a bullish argument.
The reason I am still bullish on NZD is because of their announcement to raise interest rates by the end of this year. This is way ahead of the Australian statement that said the RBA will raise interest rates starting in 2023. However, Australia's raw material economy seems like a much better bet in today's global condition of low interest rates and rising inflation in the US, England, Europe and other parts of the world.
The image above is a chart of gold production from 2020 to 2021 and forecasts to 2026. As Aussie's economy rebounds and currencies weaken with inflation, gold looks like a good long term bet. And that is good for AUD.
NU tests resistance on a falling trend line before retracing and showing rejection from that level. A lower low on the 4H chart suggests that the next move down to create another lower bottom.
AN hits a double bottom and bounces up .38% on the day. One thing to look out for is the 50 Day and 200 Day moving average intersecting and crossing. If the 50 runs below the 200, it could be a sign that the pair will continue to fall. However, the double bottom has held up pretty well so far.
Against the USD, the buck doesn't look too strong. Price made a lower low and is now coming up to test resistance coupled with a falling trend line on the 1D chart.
I like this setups a lot. ACHF is up today after testing a former double top on the 1D chart. Price is now up against resistance and hovering around that level. If price breaks above, it could see a test at the 200 DMA, and if not, will probably test support again.