The US currency could not develop a bullish trend yesterday: despite the impulsive growth, the dollar index did not leave the range of 96.6-97.5, within which it has fluctuated since June 11, that is, for two weeks already. Yesterday's attempt at a breakthrough was unsuccessful - dollar bulls did not even go to the upper ceiling of the range, not to mention its assault. As a result, the dollar froze in place, demonstrating a pessimistic mood during the Asian session on Friday. There is no trace of yesterday's "removal": traders are clearly unable to determine the vector of further movement.
The fundamental picture for the US currency is indeed controversial. Yesterday, the dollar rose amid a rapid increase in the number of infected COVID-19 in the United States (and throughout the world). The press began to discuss the likelihood of a repeated lockdown and the possible economic consequences of such a move. The scripts were "one worse than the other." The United States are now struggling to recover from spring quarantine, so a second coronavirus attack will be an extremely difficult test for the US economy. Such prospects fueled interest in protective instruments, and above all to the greenback, which again began to dominate in almost all dollar pairs.
But the dollar's take-off was interrupted by the White House. US President Donald Trump's economic adviser Larry Kudlow said the authorities did not intend to quarantine the country again. He did not exclude local lockdowns, but at the same time excluded the repetition of the spring scenario. Recently, the US Treasury Secretary voiced a similar idea, adding that the country's economy could not stand another close.
It is worth noting here that the market is quite pragmatic (and even somewhere cynical) about the distribution of coronavirus. Traders are primarily concerned about the reaction of the authorities and the possible economic consequences of the pandemic, while the increase in the number of infected people serves as a kind of barometer. Therefore, the comments of the White House for a while reassured investors, after which the dollar slowed down.
But sad and alarming statistics continue to keep market participants on their toes. Today, it became known that 40,184 cases of the disease has been recorded in the United States over the past day. Last week (and earlier in June), this figure ranged from 17-25,000. Today's figures are higher than in April, when the country experienced a peak epidemic. It also became known that the authorities of three American states have introduced quarantine measures in connection with a new wave of the spread of coronavirus in the south and west of the country. Now, people arriving in New York, New Jersey and Connecticut from regions with a high incidence of Covid-19 are required to self-insulate for two weeks. Nine states were assigned to the risk zone: Alabama, Arkansas, Arizona, Florida, South and North Carolina, Texas, Washington and Utah. In general, an increase in the incidence rate was recorded in 20 states of the country, in three of them anti-records were reported. The most difficult situation is in Florida, Texas and Arizona. These three states have a record daily incidence of COVID-19 since the start of the pandemic.
In other words, the market is faced with conflicting fundamental factors. On the one hand, the US authorities exclude the option of re-lockdown, on the other hand, the number of infected people is growing inexorably every day. Market participants do not risk getting rid of the dollar, but at the same time they are in no hurry to create a stir around the greenback. As a result, the dollar index froze around the 97.3 mark in anticipation of the next information.
At the same time, the market virtually ignored macroeconomic reports yesterday. For example, the number of applications for unemployment benefits over the past week increased by 1,480,000, with a forecast of growth of 1,300,000. This indicator stably and consistently showed a downward trend (after reaching almost 7-million mark) for ten weeks, but this week the indicator remained almost at the level of seven days ago, reflecting unhealthy trends in the labor market.
But data on orders for durable goods were much better than expected. So, the total volume of orders jumped by 15% after a two-month decline by almost 20%. This is the strongest indicator growth rate since March last year. Excluding transport, the indicator grew by 4%, also significantly exceeding the forecast values. However, the dollar ignored the above releases, as well as the release of data on the growth of the American economy (the final estimate of GDP growth for the first quarter completely coincided with the second estimate: -5%).
Thus, the US currency now correlates with the general market sentiment - current macro statistics are almost not of interest to investors. The theme of the coronavirus remains in focus: the dynamics of distribution and the possible reaction of the US authorities (and other key countries of the world). Any hints of strengthening the quarantine regime may provoke a surge in anti-risk sentiment in the market, after which demand for the dollar will increase again.
Speaking directly about the euro-dollar pair, here we see a strategic loss for buyers. Bulls of EUR/USD could not keep the pair above 1.1260 (the middle line of the Bollinger Bands indicator, which coincides with the Tenkan-sen line on the daily chart). Long positions can only be considered when consolidating above this target. And at the moment there is a risk of the price further falling to the support level of 1.1140 (the lower line of the Bollinger Bands, which coincides with the Kijun-sen line on the same timeframe).
