The euro stood dead in its tracks despite the release of data on applications for unemployment benefits. But then the single currency suddenly began to grow when the European session was about to end. At the same time, no macroeconomic data was published at this time. The reason for this is the trade agreement between China and the United States and there are plenty of reasons for concern. Although there is still no final agreement, and there is only a certain first phase, more of a declaration of intent, China made a commitment to increase US imports worth $200 billion. However, referring to the coronavirus epidemic, China has fulfilled its promise, which jeopardizes the very prospect of reaching a full-fledged trade deal between the two largest economies in the world. This means that the global economic crisis may be aggravated by a new round of the trade war, which will make the exit from the recession even more protracted. And yesterday, during the talks, Chinese Vice Premier Liu He, United States Secretary of the Treasury, Stephen Mnuchin, as well as the United States Trade Chair, Robert Lighthizer, agreed to do their best to preserve existing agreements. This is the only way to continue the progressive movement towards the end of trade disputes, which can become the key to the restoration of the global economy. At the same time, Donald Trump said that if China does not fulfill its obligations, the United States will terminate the agreement, which does not exist yet. So there is plenty of cause for concern. But so far, apart from general phrases, there is nothing else. This was the reason for the dollar's fall. So far the US is incurring losses while China makes money. Well, the prospect of unforeseen unforeseen steps on the part of the White House to correct this injustice, from Trump's point of view, makes investors pretty nervous. Moreover, the United States accuses China of the coronavirus epidemic, which somehow does not add opportunities for constructive dialogue.
As already mentioned, the market completely ignored the data on applications for unemployment benefits, which turned out to be incredibly interesting. As expected, the number of initial applications for benefits decreased for the fifth consecutive week. This time there were 3,169 thousand of them. By the way, it turned out to be even slightly better than the forecasts of 3,210 thousand. Nevertheless, the number of initial applications continues to be prohibitive, since about 200 thousand initial applications per week are normal. But here the number of repeated applications for unemployment benefits, to be absolutely accurate, has been growing for eight consecutive weeks. Significant growth has been observed only over the past six weeks. And another record high was set yesterday, and the number of repeat requests reached 22,647 thousand. This is noticeably more than the forecast of 20,450 thousand. Moreover, under normal conditions, the number of repeated applications ranges from 1,500 thousand to 2,000 thousand. The very growth in the number of repeated applications indicates that unemployment is becoming protracted. Against this background, it is understandable why the number of initial applications is being reduced, since way too many people are left without work. We can say that every day, there are fewer and fewer people who can be fired at all. But they can't find a new job. And of course, the most important thing is that if the situation on the labor market does not begin to improve, then there is no need to talk about any beginning of economic recovery. So at this point in time, once a week we get another confirmation that the exit from the recession will be long and difficult. At the same time, with each new week, the virtual date for overcoming the crisis is pushed further and further.
Repeated Unemployment Claims (United States):
If today there are no new high-profile statements regarding the trade agreement between China and the United States, then all market attention will be focused on the report of the United States Department of Labor. And frankly, the forecasts are not very comforting. The unemployment rate should jump from 4.4% to 15.5%, which should be the highest value since 1948. It is from this moment that the unemployment rate is constantly being measured. That is, today we can see the highest unemployment rate in history, which can be confirmed by regular observations. The number of jobs should be reduced by 21,780 thousand. And this should also turn into a kind of historical record. Moreover, this indicator has been monitored regularly since 1940. So again, we can see the indicator on values that have never been in history. In addition, the growth rate of average hourly wages may slow down from 3.1% to 3.0%. So the complete set - unemployment is growing at a catastrophic pace, and more salaries are falling. So it will not be possible to quickly jump out of the current recession. However, if there are no additional factors, in the form of Trump's next clever remarks, the contents of the report of the United States Department of Labor are likely to help strengthen the dollar. The logic here is extremely simple. The United States is simply the fastest to publish data on the labor market. That is, in other countries the situation is no better, but they have not yet reported on this. So there is some uncertainty in terms of understanding the scale of disasters. And investors are trying to stay away from uncertainty. In addition, even if the path will be long, but the restoration of the world economy is inevitable, and according to many, it will begin with the United States. So it is better to place your capital in advance where they will sprout earlier.
Unemployment Rate (United States):
From the point of view of technical analysis, we see that during the downward movement, the quote managed to go down to the range of 1.0775, where, on the basis of the laws of the past, there was a slowdown, and after a rebound towards the previously passed mark of 1.0850. In fact, this is the first corrective movement since the inception of the downward movement.
In terms of a general review of the trading chart, the daily period, it is clear that the price has interacted with the level of 1.0775 and it has recently occurred three times.
We can assume a temporary price fluctuation within the boundaries of 1.0830/1.0860, where the 1.0850 mark will play the role of accumulating trading forces, subsequently accelerating. Trading tactics were selected by the method of price taking relative to the given coordinates.
Specifying all of the above into trading signals:
- Buying positions are considered higher than 1.0860 towards 1.0900-1.0920.
- We consider selling positions lower than 1.0830, towards 1.0800-1.0775.
From the point of view of a comprehensive indicator analysis, we see an alternating signal due to a reverse, where hourly periods signal a buy, but the daytime period still works on the main movement, an indication to sell.
