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The jobless claims report has once again demonstrated a further deterioration in the US labor market situation. However, the market ignored macroeconomic statistics. There have been some changes but they were insignificant. Thus, there is no point in focusing on that. The previous two weeks, precisely the data on the unemployment applications, became the reason for a short-term weakening of the US dollar. This time, the market simply ignored the report. Most likely, investors are thinking about revising their plans. Recently, everyone believed that the United States would be the first to come out of the current crisis. However, today, it seems like everyone doubts that. After all, the European Union is much more confident in removing restrictions imposed due to the coronavirus epidemic. Whereas in the United States, the epidemiological situation is causing a lot of concern.
The dynamics in the American labor market indicates the beginning of a new Great Depression. Indeed, we have been witnessing a decrease in the number of initial applications for unemployment benefits for the sixth week in a row. This time this figure was only 2,981 thousand. This is the smallest number of initial jobless claims in the last eight weeks. However, it is still almost fifteen times more than the usual and regular number of initial applications per week. The decrease in the number of applications should not be misleading and inspire some optimism. After all, if mass layoffs occur for a long time, there will be no one to dismiss in the end. That is why the number of claims is reducing. This is true only if people who have lost their jobs cannot find a new one. However, the situation is very bad in this case. The fact is that the number of secondary applications for unemployment benefits is growing for the ninth week in a row. There were 22,833 thousand of them, and this is a new absolute record. That is why, it is not surprising that the number of initial applications is reduced. The number of secondary filings is simply horrendous. Thus, it is possible to compare the current situation to the Great Depression. In theory, this was supposed to somehow revive the market. But apparently, we see the first signs of an attempt to break the trend that has dominated the market in recent times. It's too early to say anything. Most likely, we are talking about a certain confusion and misunderstanding of where to move on.
The number of secondary jobless claims in the United States:
Today will start with the publication of the European Union's GDP data. The economy is expected to decline in the first quarter to 3.3%. Meanwhile, quarantine measures were introduced only in mid-March, that is, at the very end of the quarter. Moreover, according to the results of last year, the economic growth rate was 1.0%. Thus, there is a sharp economic slowdown. It seems like half a month was enough. As we can see, the situation is clearly stressful. However, this is the second assessment. Thus, investors will not see anything new and the reaction of the market will be quite restrained. If there will be any at all.
EU GDP growth rate:
Today, important information will be published in the United States. The US retail sales are expected to decline to -16.3% from -5.8%, the worst figure in more than a quarter of a century. Moreover, the industrial production in April is expected to drop to -16.4% from -5.5%.The worst part is that these are figures in annual terms. Thus, if the United States finds it difficult to get out of the regime of self-isolation, the decline will be even deeper. Given the epidemiological situation, it may be the case. Moreover, retail sales are the main guideline for the entire services sector, which accounts for almost 80% of the US economy. In other words, today's data can show how deep the economic downturn will be. Against this background, at least some assumptions can be made as to how long it will take the country to get out of this crisis. Honestly, forecasts are worrying. Everything goes to the point that the global economy will need several years to overcome the consequences of this disaster. From the point of view of classical fundamental analysis, the greenback is likely to be much weaker as a result. However, recently, we have seen how the dollar can grow steadily no matter what.
Retail Sales in the United States:
From the point of view of technical analysis, we see a downward trend that has brought the pair to the range of 1.0775, where a rebound occured. Moreover, this has been the third approximation of the price with the control level for the current month. The concentration of market participants in the range of 1.0775/1.0885 indicates a predominant downward interest.
In terms of a general review of the trading chart, it is possible to distinguish a consistent downward movement in the daily period which corresponds to the direction of the main trend.
It can be assumed that the level of 1.0775 will still put pressure on market participants. Therefore, there is a possibility of a pullback continuation. At the same time, traders should carefully analyze the price fixing points outside the control level so as not to miss the main move.
Trading signals are the following:
It is better to open long positions above the level of 1.0825 with the prospect of a move to 1.0850.
It is preferable to open short positions below the level of 1.0795 with the prospect of a move to 1.0775. The main trade deal can be considered after fixing the price below 1.0760, towards 1.0700-1.0650.
From the point of view of a comprehensive indicator analysis, we see that the minute and hour time frames signal a variable upward interest due the pullback. The daily time frame indicates sell deals.
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