EURUSD, GBPUSD, USDJPY
Weekly Forex Analysis
(May 04 - May 08, 2020)
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US Dollar Fundamental Outlook: NFP Expected To Show 21 Million Job Losses; US Unemployment Rate Forecasted At 16%
The US Dollar ended the last week generally weaker, though the recent movements in currencies can be attributed mainly to technicals as most pairs are trading in some form of a range.
The Fed kept rates unchanged last week and pledged to keep the stimulus measures in place until the economy is well on the road to recovery. The impact from the coronavirus on the economy is already evident as the GDP report showed a contraction of -4.8%. This week, the focus will be on Friday's jobs reports where the unemployment rate is expected to surge to 16%. The Non-Farm Payrolls report is forecasted at a staggering negative 21 million. The ISM
non-manufacturing PMI, scheduled for Tuesday, is expected at 37.5, but the risks are that the actual release will be even weaker.
The Dollar has so far traded orderly within its 98.70 – 101.00 range (i.e., DXY Index) for the month of April, and that is likely to remain the case until the next big event disrupts this temporary order within the chaos. Economic data hasn't mattered much since the onset of the crisis, and thus, the demand for Dollars will continue to be driven primarily by liquidity, geopolitics, and developments with the COVID-19 pandemic.
Euro Fundamental Outlook: EUR Keeps Steady As EU Prepares To Lift Restrictions
The ECB also kept monetary policy unchanged at the meeting last Thursday, except for expanding the refinancing operations, which they've now decided to call PELTROs (i.e., pandemic emergency LTROs). Preliminary GDP data showed the economy likely contracted by -3.8% in the first quarter.
Euro traders will watch the final releases of the PMI surveys this week, but other than that, there are no market-moving events on the calendar. The EU is considering to carefully open up the economy as the peak of the pandemic in Europe seems to be behind us, which is a potential source of positive news.
The Euro was stronger across the board last week, though that was based more on arbitrary factors rather than any improvement in the fundamentals. Thus, the Euro may just reverse some of those gains this week or simply trade sideways.
EURUSD Technical Outlook:
As we predicted in the previous weekly analysis, EURUSD went for the 1.10 level, and the bullish attempt was rejected there. Thus, the 1.07 – 1.10 range has held, and EURUSD may now move toward the bottom of this range.
To the downside, 1.09 and 1.08 are likely to be moderate support zones, while the most important support is likely to be at the 1.07 lows.
To the upside, 1.10 is expected to hold. However, in case it doesn't, then 1.12 would be the next resistance higher for EURUSD and the likely area to be reached.
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