13.08.202010:53 Forex Analysis & Reviews: EUR/USD. Fed pessimism, silence in Congress and Trump's impossible promises

The euro/dollar pair is attacking the 18th figure again today. Yesterday, this attempt was unsuccessful: Wednesday's trading day ended at 1.1783, however, the pair's bears were unable to take the lead, so buyers organized another offensive at the start of the European session on Thursday. Moreover, the dollar was not supported either by strong Nonfarms or strong data on inflation growth. The market still doubts the rapid pace of the US economic recovery, and the pessimistic comments of some Fed officials only reinforce this skepticism.

Let me remind you that the position of the dollar bulls weakened yesterday, when the US Treasury Secretary dismissed their hopes for a reduction in the capital gains tax. Before his speech, Donald Trump literally announced concrete steps in this direction, promising to present the corresponding initiative "in the coming weeks." However, the minister politely noted that a corresponding legislative amendment is needed to reduce the tax burden. This means that the president will not be able to use only his powers - he will have to negotiate with the Senate and the House of Representatives. This idea is expected to fail in advance, because, firstly, the congressmen were unable to agree on a more important and socially significant bill: after three weeks of negotiations on the allocation of aid to the American economy, the dialogue reached a dead end. Therefore, tax issues that are usually cause fierce controversy among politicians one hundred percent will not pass the millstones of Congress. Secondly, the Democrats will not play "give-away" to Trump before the presidential elections, artificially increasing his rating.

In other words, Mnuchin made it clear that the words of the head of the White House will remain words even if, contrary to all of the above, he will submit a legislative initiative to Congress. White House economic adviser Larry Kudlow confirmed this fact today. He said that Trump is not considering the option of using the powers of the President of the United States in order to reduce the tax on capital gains by presidential decree.

In the meantime, the long-suffering trillion-dollar bill in aid to the US economy is still only a draft. At the beginning of the week, the same Steven Mnuchin assured journalists that negotiations will resume this week, and a compromise can be found "literally before Friday." But today is Thursday, and Republicans and Democrats are still in different corners of the ring. Negotiations have resumed, not to mention the achievement of any agreement. Trump's legally dubious edicts, which were signed over the weekend, have also failed to help the dollar bulls. According to the general opinion of experts, they fulfilled the role of a "patch", while the US economy needs comprehensive assistance.

This, in particular, was announced yesterday by the head of the Federal Reserve Bank of San Francisco, Mary Daly. According to her, the fight against coronavirus has dragged on significantly, so Congress must again "lend a helping hand." She warned that without extending "full" unemployment benefits, the country would get a hole in consumer demand and spending. At the same time, Daly expects a worsening of the situation in the autumn-winter period: according to her estimates, an increase in the number of bankruptcies and cases of insolvency can be expected in October-November.

Moreover, Daly's colleague, Boston Federal Reserve Bank Chairman Eric Rosengren, is also pessimistic about the prospects for the recovery of the US economy. Yesterday, he said that the authorities of the American states "are not up to the task of containing the spread of the coronavirus." According to him, unemployment in the United States (which dropped to 10.2% in July) will decline "very slowly" due to the likely deterioration of the epidemiological situation in those states where they rushed to ease quarantine measures. He also said that the most difficult situation will develop in the fall and winter, when seasonal flu will also "connect" to the coronavirus. The head of the Federal Reserve Bank of Boston also stressed that in Europe, where strict quarantine restrictions were introduced in the spring, "the economy is growing faster, and the incidence of COVID-19 is lower."

It is noteworthy that Donald Trump voiced the exact opposite idea today: in his opinion, the US economic indicators "are significantly ahead of European ones," while the Americans are demonstrating "incredible success in the fight against COVID-19." But judging by the reaction of the currency market, traders are inclined to support the pessimistic position of the FRS representatives than the optimistic exclamations of the head of the White House.

Thus, amid the half-empty economic calendar and the absence of "coronavirus anti-records" in the United States, the comments of politicians and representatives of the Fed came to the fore. Their rhetoric allowed the EUR/USD bulls to develop an upward offensive. Buyers managed to overcome the nearest resistance level at 1.1805 (Tenkan-sen line on the daily chart), and now, the next resistance level is at 1.1920. The support level is 1.1710 (the middle line of the Bollinger Bands indicator on the same time frame): here, you can place a stop loss, since if the price goes below this target, the upward scenario will lose its relevance.