The euro, in pair with the dollar, remains under pressure, due to a number of statistics that once again indicate the problems that many countries will face against the background of the spread of the coronavirus. Although a sharp jump in unemployment is fully expected, its growth rate will still significantly affect the global economy. Yesterday, the Bank of America forecasted the global GDP to reduce by 2.7% in 2020.
The significant revision of the indicator is directly related to the ineffective measures that the governments implemented to curb the effects of the pandemic. It is possible that once the pandemic ends, growth may not be as rapid as previously expected, as consumer confidence indicators were much lower than the preliminary estimate.
Meanwhile, the problems of the US labor market, which the scale of it will be clear today, will return the demand for dollar and increase pressure on the risky assets. The weekly report yesterday showed a sharp increase in applications for unemployment benefits, as the indicator jumped to the level of 6.6 million, indicating a sharp decline in the labor market. Two weeks ago, the number of applications jumped by 3.3 million due to the suspension of work in many sectors of the economy.
However, it is worth noting that the sharp increase in applications may also be due to the fact that people who lost their jobs due to coronavirus are trying to count on temporary financial assistance, which was approved last week. This does not make it any easier though, because many experts predict that the US economy, during the coronavirus pandemic, may lose up to 20 million jobs, which has never happened in history.
Moreover, if the market has not yet reacted strongly to these indicators, today's report on the number of people employed in the non-agricultural sector may bring down the stock market, which will lead to the strengthening of the dollar, as the currency is considered to be a safe haven asset. Anyhow, many still underestimate the scale of the problem that awaits the economies of developed countries, and the $ 2 trillion aid that was recently approved in US is clearly not enough to stop the destruction.
Meanwhile, ISM's report on the index of current business conditions in New York fell from 39 points in February, to 12.9 points in March this year, which is the lowest value in the entire history of this index. The sub-index of expectations for the six months ahead was 37.9 points, and the employment sub-index fell to 50 points.
The US manufacturing orders in February, on the other hand, remained unchanged. The foreign trade deficit for February, as reported by the Department of Commerce, fell by 12.2% and amounted to 39.93 billion dollars, due to a reduction in imports by 2.5%, and reduction in exports by 0.4% (to $ 207.54 billion). The two indicators were disregarded by market participants.
The speech of Robert Kaplan, President of the Federal Reserve Bank of Dallas, mainly discussed forecasts of the economy. Kaplan expects the GBP to decline sharply in the second quarter of 2020, and grow weakly on the 3rd quarter of 2020. Unemployment, on the other hand, will rise to about 10% and will be about 8% by the end of the year, as the situation of consumers will worsen due to the crisis caused by the coronavirus. As for the work of the Fed, he drew attention to the need of taking a more responsible approach to lending, as only these efforts will help restore the markets.
As for the technical picture of EUR/USD, it is unlikely that the demand for risky assets will increase significantly. The bears continue to control the market, so the current trend will most likely continue. The nearest target of sellers is the lows of 1.0780, where a break of which will quickly push the pair to the larger support of 1.0700, and then to the lows of the year at 1.0640. The break of the level will open a direct road to the area of 1.0200. However, if the bulls manage to regain position in the market, the pair will return to the resistance of 1.0890, and will jump to the highs of 1.1040 and 1.1140.
