EURUSD, GBPUSD, USDJPY
Weekly Forex Analysis
(April 06 - April 10, 2020)
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US Dollar Fundamental Outlook: More Than 10 Million American Jobs Were Lost In Only Two Weeks; US Unemployment Rate To Spike Above 10%!
The employment data out of the US is horrific. America lost more than 10 million jobs in just two weeks, as shown by the unemployment claims. Non-Farm Payrolls were also terrible, recording losses of 701k jobs while the unemployment rate climbed to 4.4% - much higher than the 3.8% consensus estimate.
The coronavirus pandemic is already taking a big toll on businesses’ and households’ financial situation. It is not just the US, but the global economy is expected to fall off a cliff in Q2. The markets are already expecting this and are moving in anticipation of these events. With dismal projections for the world economy, risky assets will hardly be able to recover for the time being.
The Federal Reserve was able to satisfy the thirst for Dollars by conducting massive amounts of bond purchases, extending swap lines with a dozen of the world’s biggest central banks, and enabling foreign parties to swap US treasuries for Dollars directly at the Fed. Nonetheless, the Dollar firmed last week as risk aversion took over as the main driver. While the Fed measures certainly help to alleviate some of the “dash for cash” issues, the USD could continue
to be the preferred choice for as long as risk aversion lingers in markets.
Euro Fundamental Outlook: Eurozone Finance Ministers Meet April 7 To Come Up With Fiscal Solutions Amid The Corona Crisis
The disappointment of the markets with EU leaders’ discord regarding the issuance of common Corona bonds for the Euroarea continued to pressure the Euro last week. This came with the added weight of the crisis intensifying across all EU countries and with plunging economic indicators. The PMI survey reports from last week confirmed that a deep recession in the Eurozone is now a given. Services PMIs fell into the 20s area, much weaker even when
compared to the worst of the 2009 or 2012 EU crises. In the meantime, Spain overtook Italy as the country with the highest number of COVID-19 cases in Europe.
EZ finance ministers are set to hold a conference call tomorrow (Tuesday) to discuss financing options for dealing with the COVID-19 crisis, among which the common Corona bonds are likely to be on the table. Some good news out of this meeting is desperately needed and could help to lift the Euro currency.
There is also some encouraging news from Italy. Both the number of newly reported cases and deaths reduced last week. If this trend continues and authorities start to contain the virus, risk appetite could find some support, which could at least stabilize risky assets somewhat. Though, over the longer-term, that may not translate into a stronger Euro necessarily, especially if EU existential fears start to resurface more prominently again.
EURUSD Technical Outlook:
The recent wild price action has completely distorted the shorter-term charts on EURUSD as on most other currency pairs. With that said, we can look for the psychological price levels to act as support and resistance, as well as levels derived from technical indicators such as pivot points.
In this regard, the first area higher is the weekly pivot point near the 1.09 level. The 1.10 zone will be next in line as psychological resistance. The 1.1050 area is confluence pivot resistance due to the monthly pivot point for April and the weekly resistance 1.
To the downside, the 1.08 zone is the nearest support, where the pair is currently trading. 1.07 is the next support lower. Below it, the 1.05 multi-year lows will come in focus as the next support.
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