Honestly, yesterday should have been probably the most boring and dull throughout the trading week. Like it or not, the macroeconomic calendar was completely empty. So on the charts of quotes, we had to contemplate a horizontal line and this is the worst case scenario. In a good way, even a certain downward movement of the single European currency and the pound was obvious. Albeit insignificant, but still. And in fact, everything went exactly according to the first scenario. But some time later, after the opening of the American session, an amazing thing began - the dollar began to lose its position again. Yes, so confident that it is already breathtaking. But strangely enough, it could not do without the intervention of the Federal Reserve System. This time, the role of the talking head was played by Raphael Bostic. The Head of the Federal Reserve Bank of Atlanta complained that the pace of economic recovery is extremely disappointing for the regulator. At the same time, according to him, this sad trend will continue, if not at all replaced by a new wave of deterioration of the main macroeconomic indicators. And the reason is that it does not work out to fully open the economy. The epidemiological situation is so complex and difficult that some states were even forced to reintroduce restrictive measures, which had just begun to gradually take off. But if Raphael Bostic limited himself to this alone, then nothing terrible would have happened. However, the head of the Federal Reserve Bank of Atlanta added that the Federal Reserve continues to consider the possibility of additional stimulus measures if the economy slides into a prolonged depression. And from his words, it follows that this is exactly what is happening now. The most interesting thing here is what kind of stimulating measures it is. The fact is that the Federal Reserve System has only two tools. This is a reduction in the refinancing rate and the inclusion of the printing press. However, given the fact that the refinancing rate is already essentially at a zero mark, it can only be reduced to negative values. And the trick is that all the representatives of the Federal Reserve System have repeatedly expressed the opinion that the policy of negative interest rates is extremely fatal for the economy. That is, this option is immediately swept away, and what only remains is a new quantitative easing. However, such tricks do not particularly please investors, as they threaten to depreciate money, and therefore, a sharp decline in return on investment.
This process continues to this day, largely on emotions. However, it is likely that today's data on unemployment benefits in the United States will only confirm the words of Raphael Bostic. The fact is that the number of initial applications for unemployment benefits should be reduced from 1,427 thousand to 1,380 thousand. The number of repeated applications may decline from 19,290 thousand to 19,200 thousand. It seems like everything is fine and a gradual improvement is observed in the job market. But if we take into account the fact that the number of applications for unemployment benefits is about an order of magnitude greater than the one we are used to in recent decades, it becomes clear that the dynamics are practically absent. Rather, it is about stabilizing the labor market at these terrifying values and this already threatens a complete depression. Moreover, this is precisely what is now contributing to the strengthening of the single European currency and the pound.
Nevertheless, there is reason to believe that the data may turn out to be slightly better than forecasts, which will indicate a somewhat faster recovery of the labor market. And if this turns out to be true, then we will see a rapid reversal and restoration of the dollar. Moreover, the growth of the single European currency and the pound was not only noticeable and impressive, but it also happened in an extremely short time. That is, they are locally overbought, and the market will try to correct these imbalances. So even if the data on applications for unemployment benefits coincide with forecasts, you should not expect further growth of the single European currency or the pound. In many ways, they simply have nowhere to grow.
Repeated Unemployment Insurance Claims (United States):
The euro/dollar currency pair managed to build up long positions over the past day, eventually forming an inertial movement in the direction of 1.1370. It can be assumed that this movement has a local character, where in case of a price consolidation below the level of 1.1350, the downward mood will resume in the direction of 1.1300.
The pound/dollar currency pair similarly arrived on a wave of upward positions, eventually focusing just above the level of 1.2620. A temporary chatter within the range of 1.2600/1.2650 can be assumed, where in case of price consolidation below the level of 1.2595, we will open another downward move in the direction of the level of 1.2500.