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03.07.202011:43 Forex Analysis & Reviews: EUR / USD: US unemployment report's impact on the pair's dynamics

Przegląd długoterminowy

Exchange Rates 03.07.2020 analysis

The greenback interrupted the decline on Thursday after the US Department of Labor released monthly statistics on employment in the country.

The USD index, which first sagged to a weekly low of 96.8 points, then rose to 97.3 points against the backdrop of data showing that jobs in the largest economy in the world are recovering 1.5 times faster than forecasts.

According to the US Department of Labor report, in June the number of jobs in the country increased by a record 4.8 million, and the unemployment rate fell to 11.1% from 13.3% recorded in May.

"At first glance, the data just looks fantastic. Employment has grown in all sectors of the American economy. At the same time, the largest number of new jobs (2.08 million) accounted for the services sector, "said economists at ING.

"At the same time, the total number of employees is still 14.66 million lower than in February. At the same time, more than 19 million Americans receive unemployment benefits. Now they are supported by payments of $ 600 per week from the Trump administration. However, it is not clear what will happen after July 31, when the validity of these measures expires, "they added.

"More Americans now live on unemployment benefits than during the worst periods of the Great Depression. At the same time, according to the National Federation of Independent Businesses (NFIB), small entrepreneurs have been downsizing since mid-June. All this indicates that the road to recovery will be long, "said ING experts.

The bank expects a steady weakening of the greenback and is optimistic about the prospects for the euro.

ING strategists expected EUR / USD growth to 1.18 by the end of the current quarter and by 1.20 by the end of the year.

"The COVID-19 topic and statistical data are certainly important for investors, but the Fed's" printing press "is the real driver for the currency market, and the regulator is unlikely to decide to turn it off in the foreseeable future. It is assumed that the flow of money from the US Central Bank will ensure the maintenance of an acceptable level of risk appetite in the coming quarters. In light of the persistent negative correlation between the USD exchange rate and the S&P 500 index, this allows us to expect a weakening of the US currency, the downward trend of which will develop as the global economy slowly recovers and adapts to new conditions, "they said.

According to OCBC analysts, the EUR / USD pair currently lies flat around 1.1236 and is preparing to form a basis at the psychological level of 1.12, which might mean further growth.

"The couple lost points earned on a risk appetite, as media reported that EU member states were still unable to come to an agreement on a stimulus package for the region's economy. This news restrained the further growth of the pair and strengthened its position in the range. The inability of the EUR / USD to break the support at 1.1200 should alert the bears. The pair is likely to form a base around 1.1200, and then move north, " said OCBC analysts.

Viktor Isakov,
Ekspert analityczny InstaForex
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