Free Forex Trading Signals: EURUSD, AUDUSD May 2016

■ Market: Foreign Exchange

■ Forecast: EURUSD to Range / Commodity Currencies to Correct in May

It seems that the Foreign Exchange market has entered a new phase. Recent economic data from both sides of the Atlantic makes ECB and FED less willing to accept further currency appreciation. Both monetary authorities fear that a harder monetary policy will have a direct negative effect on the real economy. Hence, we shouldn’t be surprised seeing EURUSD trading in a broader range between 1.05 and 1.17, for quite some time. On the other hand, commodity currencies such as the Canadian Dollar, the Australian Dollar, and the New Zeeland Dollar are rapidly appreciating against EUR and USD. In the first months of 2016, the Australian Dollar against the US Dollar lifted from 0.68 to 0.78 and the USD against the Canadian Dollar slumped to 1.26 from 1.46. These extreme movements can be explained as most commodity prices have bottomed in early 2016 and now they are rising rapidly. Note that AUD is highly correlated to Gold and CAD is highly correlated to Crude Oil.

Our Previous TCI Trading Signal

In our previous Trading Signal in early March 2016, we have forecasted a bullish British Pound against the US Dollar. GBPUSD was trading at 1.3913 back then. As it was mentioned: “focus on Long GBPUSD positions by targeting a strong momentum that may lead GBPUSD to 1.41 and then to 1.43”. In the middle of March, GBPUSD hit both targets and now it is trading above 1.45. The TCI trading signal was fully confirmed.

Macroeconomic Outlook

Commodity Prices and China

The commodity prices have bottomed in early 2016 and now they are rising fast. According to many analysts, this is due to the increase of Chinese demand, signs of tighter supply, and the prospect of a weaker US Dollar. Citigroup Inc. in a recent report stated that “There is growing evidence that virtually all commodities have stared at a price bottom and are groping for a return to normal”. In the same report, Citigroup supported that oil and natural gas markets are recovering, while industrial metals are advancing as China’s property market picks up.

Tensions inside the Euro Area

The negative Euro interest rates are causing some tensions inside the ECB. As Mario Draghi said: “We continue to expect interest rates to remain at present or lower levels for an extended period of time, and well past the horizon of our net asset purchases.”

Societe Generale in a recent report supported that the ECB quantitative easing and the negative intervention rates 'kicks' investment funds outside the euro area. In a yearly basis (February 2015-February 2016) Europeans invested 829 billion Euro outside the euro area. For the same period, the incoming foreign investment to Euro area reached only 261.5 billion, creating a significant net outflow. Societe Generale supports that

On the other hand, the aggregate Eurozone current account (12 months to February 2016) amounted to a surplus of 321.5 billion Euro or 3.1% of GDP.

The British Pound Recovers

Despite the general anticipation regarding a Brexit in the referendum of June 23rd, 2016, most British banks assess that the vote will be in favor of the EU stay. That can partly explain the bullish behavior of the British Pound against other majors during the past weeks.

TCI on EURUSD

TCI is applied on EURUSD and AUDUSD in order to forecast the highs/lows of the next couple of weeks. The Trading Center Indicator (TCI) is a unique Technical Analysis Indicator developed by TradingCenter.

In the following table (press slider), the TCI Indications regarding EURUSD

The EURUSD Range

As you can see in the following Heikin-Ashi D1 chart, EURSUD trades in a broad range between 1.05 (S2) and 1.17 (R2). Strong additional support is found at 1.08 (S1) and strong additional resistance at 1.15 (R1).

Chart: EURUSD Range

TCI on AUDUSD

In the following table (press slider), the TCI Indications regarding AUDUSD.

EURUSD and AUDUSD Statistics

EURUSD and AUDUSD stats based on 13.5 years of research by TradingCenter.

■ EURUSD: April is traditionally a very good month to go long on EURUSD (+0.72%). This is not true for May (-0.52%).

■ AUDUSD: April is an excellent month to go long on AUDUSD (+1.83%). On the contrary, May is a good month to go short on AUDUSD (-0.91%).

Press the following slider to reveal the full EURUSD and AUDUSD stats for April and May.

 

Conclusions

EURUSD is expected to range between 1.05 and 1.17 for quite some time. At this moment, both ECB and FED are not willing to accept any further monetary risks. Only the release of surprising fundamental data can give birth to a new EURUSD master trend.

On the other hand, commodity currencies (AUDUSD, NZDUSD, and USDCAD) can certainly move higher in 2016. But all three pairs have already appreciated rapidly in early 2016.

May 2016 is expected to be a corrective month for commodity currencies. If you want to go long on commodity currencies it seems wise to wait for a correction in May before trading hard. Nevertheless, carry trading commodity currencies can be one of the best investment ideas of 2016.

 

■ Free Forex Trading Signals: EURUSD, AUDUSD

George Protonotarios

TradingCenter (April, 27th, 2016)