EUR/USD. Dollar lives on hopes: US Treasury Secretary promised the "golden mountains"

Trading 11 juin 2020 Commentaire »

A positional struggle continues in the euro-dollar pair: buyers are trying to continue the upward trend, while sellers are resisting, pulling the price to the 12th figure. As a result, the pair, although it demonstrates increased volatility, but actually stands still, within the 13th price level. Both bears and bulls need a powerful informational occasion that would help to continue moving in one direction or another.

Meanwhile, the fundamental picture for the pair is controversial, although yesterday's Federal Reserve meeting did not end in favor of the US currency. However, the market quickly played out the dovish rhetoric of the US central bank, switching to other fundamental factors. Firstly, many theses voiced yesterday were already voiced earlier - for example, regarding the fate of the interest rate, which they do not plan to raise until the end of 2022. Secondly, the regulator did not annoy the market by discussing a negative rate or the intention to introduce control over bond yields. That is, the central bank bypassed the most acute and painful topics for the dollar, thereby smoothing out the overall impression of the June meeting. As for the updated forecasts, there is nothing new for traders here. The market has long been aware that this year will be significantly worse for the US economy than the previous one, and the results of the second quarter will be record bad. Therefore, the fact of taking such prospects was not surprising, and even less shocking market participants.

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Thus, the initial reaction of the market was of a reflex nature: traders reacted to unconditionally dovish factors that could not help weakening the dollar. Let me remind you that the Fed promised to increase purchases of treasury and mortgage-backed securities "at least at the current pace" in order to maintain the level of lending to households and enterprises. In particular, this week it is planned to buy back $20 billion in Treasuries and $22.5 billion in mortgage-backed securities. Also, the central bank did not rule out the possibility of conducting repos in large volumes, "if the economic situation so requires."

Fed commitment to stimulus policy is an unpleasant fact for the dollar. But then again - the market most likely allowed the dovish scenario of the June meeting, so the EUR/USD bulls could not gain a foothold in the area of the 14th figure, although at the end of yesterday they confidently entered.

Today, other fundamental factors have come to the fore. Firstly, traders focused on Powell's phrase that the bottom of the crisis has already been passed, and that in the second half of the year the economy will actively recover. At the same time, Powell did not rule out that the authorities will continue to provide incentives for businesses to overcome the crisis.

The idea of additional incentives was developed by US Treasury Secretary Stephen Mnuchin. Speaking in the Senate, he said that he would seriously consider the issue of additional direct payments to people "under the bill on the next phase of anti-crisis assistance in connection with coronavirus." According to him, assistance should also be given to industries that are trying to resume work, including the hotel business and tourism. Later, in an interview with one of the television channels, he announced that he was ready to personally go to Congress for additional funds to protect jobs and employees. In addition, the head of the US Treasury noted that the United States would not be able to afford to close the economy again because of the coronavirus.

In other words, the market received two important messages today: firstly, the White House is ready to lobby for a new round of federal assistance, and secondly, the White House is against the introduction of a new lockdown. Actually, there are no reasons for its introduction: contrary to fears, protests in the US did not provoke a surge in COVID-19 diseases. As US Vice President Mike Pence said today, over the two weeks of protests, the increase in the number of diseases "is not observed."

All of the above factors supported the greenback. However, dollar bulls could not organize the rally - including paired with the euro. Apparently, the market doubts that Democrats and Republicans will be able to find a common denominator about additional incentives. Let me remind you that in May the Democratic Party already tried to lobby the three-trillion package of additional assistance. The bill was passed in the House of Representatives (where they control the majority), but got stuck in the Upper House of Congress. The fact is that the initiative of the Democrats was harshly criticized by the Republicans, who in turn control the Senate. Also, the proposed document was criticized in the White House (and Trump, I recall, has the right to veto). According to representatives of the Republican Party, the Democrats use this legislative initiative as "public relations at the budget expense", in anticipation of the presidential election, which should be held within six months. It is likely that the Democrats will also not allow Republicans to publicize on this issue - they have the power to block the consideration of the bill in the House of Representatives.

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Hypothetically, the stalemate situation is reflected both in the positions of the dollar and in the dynamics of the EUR/USD pair. As a rule, the "motivational" statements of politicians and senior officials have a short-term impact on the market, unless they are then supported by concrete actions. Therefore, if the Republicans do not introduce a bill in the near future, the Mnuchin factor will lose its influence. And traders of the euro-dollar pair, in turn, will shift the focus of their attention to the summit of the EU countries, which is due to take place on June 19 (online). The agenda of this summit includes a long-term financial plan (i.e., the EU budget for 2021-2027) and the Eurozone Economic Recovery Fund, in the context of the recently presented anti-crisis fee of the European Commission. If the White House does not support Mnuchin's words with actions, EUR/USD traders will completely switch to the news flow associated with the above meeting of EU leaders.

From a technical point of view, the pair on the daily chart is still between the middle and upper lines of the Bollinger Bands indicator, as well as above all the lines of the Ichimoku indicator, which still shows the bullish Parade of Lines signal. All this suggests that the pair retains the potential for its further growth - at least to the first resistance level of 1.1450 (the upper line of the Bollinger Bands indicator is on D1). If the Trump administration follows additional messages regarding additional incentives, the pair could develop a corrective pullback to the support level of 1.1260 (Tenkan-sen line on D1).

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US market falls by 4-5% in major indices – remembers the economy. EURUSD

Trading 11 juin 2020 Commentaire »

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The US market falls by 4-5% in major indices - it remembered the economy. EURUSD

Major US indices fell 4% or more in the first three hours of trading on Thursday.

The unemployment report showed new 1.5 million applications per week - this shows that employment growth will not be as fast as it seems.

The Fed forecast shows unemployment at 9.3% at the end of the year - this is quite a lot for the United States.

We have long said that the growth of recent weeks is completely unjustified.

The US market, you can now sell from the rebound up - of course, sales from yesterday's prices are much more interesting - but it's not my fault if you did not listen.

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EURUSD: The euro is quite steadily experiencing a storm in the US market on Thursday.

We keep purchases from 1.1320, the target is 1.1480.

Stop at 1.1275.

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EURUSD confirms our warning signals from our last analysis

Trading 11 juin 2020 Commentaire »

EURUSD is breaking below the bullish channel. In our last analysis we warned bulls of the bearish divergence signs by the RSI. The RSI was not making new highs as price was and this was a sign of weakness as we explained yesterday. Price is now challenging channel support.

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Blue lines - bullish channel

Black line - bearish divergnce

EURUSD is breaking lower. Support at 1.13 is now being tested. A break below it will open the way for a move much lower towards 1.1150. Resistance is now at 1.1360 and as long as price is below that level I'm bearish looking for a pull back. First target is at 1.1175 and next at 1.1020.

The material has been provided by InstaForex Company - www.instaforex.com

Gold price remains inside trading range since April

Trading 11 juin 2020 Commentaire »

Gold price reached again the upper trading range boundary at $1,750. Gold price continues to move sideways the last few months. Now being close to the upper boundary it is time to consider our options.

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Blue rectangle- resistance

Blue lines -trading range

Gold price is at major resistance area once again. As long as Gold trades below $1,750 we prefer to be neutral or bearish. A possible double top rejection at $1,750 could lead to another decline below $1,700. Gold price has made no real progress since April. Being close to key resistance I prefer to try a short position with a tight stop. Short-term support is found at $1.716. Breaking below it will increase chances of moving towards lower trading range boundary at $1.670.

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ECB's Lane Says Ready To Adjust All Instruments As Needed

Trading 11 juin 2020 Commentaire »

The Governing Council stands ready to adjust all its instruments as needed to support the euro area economy during the severe crisis triggered by the coronavirus, or Covid-19, pandemic, the European Central Bank Executive Board member and Chief Economist Philip Lane said.

The central bank is ready to adjust its key policy rate, which is the deposit rate that is currently at -0.50 percent, Lane said in an interview to the Il Sole 24 Ore newspaper. The interview text was published on the ECB website on Thursday. The previous change in the deposit rate was a reduction in September 2016. "In the current environment of exceptional uncertainty and remaining stress in financial markets, asset purchases within the PEPP have proven a particularly effective tool, so we focused on these in our most recent decision," Lane said.


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U.S. Producer Prices Rebound Amid Spikes In Food, Energy Prices

Trading 11 juin 2020 Commentaire »

A report released by the Labor Department on Thursday showed a much bigger than expected increase in U.S. producer prices in the month of May.

The Labor Department said its producer price index for final demand climbed by 0.4 percent in May after tumbling by 1.3 percent in April. Economists had expected the index to inch up by just 0.1 percent.

The bigger than expected increase in producer prices was partly due to a spike in food prices, which surged up by 6.0 percent in May after falling by 0.5 percent in April.

Energy prices also showed a substantial rebound, jumping by 4.5 percent in May after plummeting by 19.0 percent in the previous month.

Excluding food and energy prices, core producer prices edged down by 0.1 percent in May after falling by 0.3 percent in April. The dip in core prices matched economist estimates.

The modest decrease in core prices came as prices for services edged down by 0.2 percent for the second consecutive month.

Prices for trade services declined by 0.8 percent, more than offsetting a 1.5 percent jump in prices for transportation and warehousing services. Prices for other services were unchanged.

Compared to the same month a year ago, producers prices in May were down by 0.8 percent, reflecting a smaller decrease compared to the 1.2 percent slump in April.

Meanwhile, the report said the annual rate of growth in core producer prices slowed to 0.3 percent in May from 0.6 percent in April.

"With the demand shock from the pandemic looking to have stabilized, price dynamics should slowly normalize in coming months," said a note from economists at Oxford Economics.

They added, "But the expected gradual recovery in demand, along with a strong dollar and depressed oil prices will keep a lid on price inflation for months to come."

The Labor Department released a separate report on Wednesday showing a modest decrease in consumer prices in the month of May.

The report said the consumer price index edged down by 0.1 percent in May after slumping by 0.8 percent in April. Economists had expected consumer prices to come in unchanged.

Excluding food and energy prices, core consumer prices also slipped by 0.1 percent in May after falling by 0.4 percent in April. Core prices were also expected to come in unchanged.

Compared to the same month a year ago, consumer prices in May were up by just 0.1 percent following the 0.3 percent increase in April.

The annual rate of growth in core consumer prices also slowed to 1.2 percent in May from 1.4 percent in April.


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U.S. Initial Jobless Claims Drop For Tenth Straight Week

Trading 11 juin 2020 Commentaire »

With businesses reopening following the coronavirus lockdown, the Labor Department released a report on Thursday showing a continued decrease in first-time claims for U.S. unemployment benefits in the week ended June 6th.

The report said initial jobless claims tumbled to 1.542 million, a decrease of 355,000 from the previous week's revised level of 1.897 million.

Economists had expected jobless claims to slump to 1.550 million from the 1.877 million originally reported for the previous week.

Jobless claims declined for the tenth straight week after reaching a record high of 6.867 million in the week ended March 28th.

Nonetheless, the number of new claims for unemployment benefits since the coronavirus lockdown now exceeds 44 million.

The Labor Department said the less volatile four-week moving average also dropped to 2,002,000, a decrease of 286,250 from the previous week's revised average of 2,288,250.

Continuing claims, a reading on the number of people receiving ongoing unemployment assistance, also slid by 339,000 to 20.929 million in the week ended May 30th.

The four-week moving average of continuing claims fell to 21,987,500, a decrease of 404,750 from the previous week's revised average of 22,392,250.

With jobless claims still at an elevated level, Paul Ashworth, Chief U.S. Economist at Capital Economics, said it is "hard to square the claims figures with the much more upbeat news on the labor market from May's Employment Report."

Last Friday, the Labor Department released a separate report unexpectedly showing a substantial rebound in employment in the month of May.

The Labor Department said non-farm payroll employment jumped by 2.51 million jobs in May after plummeting by a revised 20.69 million jobs in April.

The record spike in employment came as a shock to economists, who had expected the loss of another 8.0 million jobs following the nosedive of 20.5 million jobs originally reported for the previous month.

Employment rose sharply in leisure and hospitality, construction, education and health services, and retail trade, according to the Labor Department.

With the unexpected rebound in employment, the Labor Department said the unemployment rate dropped to 13.3 percent in May from 14.7 percent in April. Economists had expected the unemployment rate to surge up to 19.8 percent.


The material has been provided by InstaForex Company - www.instaforex.com

U.S. Producer Prices Rise More Than Expected In May

Trading 11 juin 2020 Commentaire »

A report released by the Labor Department on Thursday showed a much bigger than expected increase in U.S. producer prices in the month of May.

The Labor Department said its producer price index for final demand climbed by 0.4 percent in May after tumbling by 1.3 percent in April. Economists had expected the index to inch up by just 0.1 percent.

The bigger than expected increase in producer prices reflected sharp jumps in prices for food and energy, which surged up by 6.0 percent and 4.5 percent, respectively.

Excluding food and energy prices, core producer prices edged down by 0.1 percent in May after falling by 0.3 percent in April. The dip in core prices matched economist estimates.


The material has been provided by InstaForex Company - www.instaforex.com

U.S. Weekly Jobless Claims Drop To 1.542 Million

Trading 11 juin 2020 Commentaire »

With businesses reopening following the coronavirus lockdown, the Labor Department released a report on Thursday showing a continued decrease in first-time claims for U.S. unemployment benefits in the week ended June 6th.

The report said initial jobless claims tumbled to 1.542 million, a decrease of 355,000 from the previous week's revised level of 1.897 million.

Economists had expected jobless claims to slump to 1.550 million from the 1.877 million originally reported for the previous week.

Jobless claims declined for the tenth straight week after reaching a record high of 6.867 million in the week ended March 28th.


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Dollar Little Changed After U.S. Weekly Jobless Claims

Trading 11 juin 2020 Commentaire »

The U.S. weekly jobless claims for the week ended June 6 and producer price index for May have been released at 8:30 am ET Thursday. After the data, the greenback changed little against its major counterparts.

The greenback was trading at 107.06 against the yen, 1.1338 against the euro, 1.2646 against the pound and 0.9429 against the franc around 8:31 am ET.


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