US dollar weakens as US jobless claims set to cross 1 million
US stocks rose yesterday as traders cheered the $2 trillion rescue package deal made by congress. The S&P500 rose by 1.2% while the Dow Jones index rose by more than 2%. The stocks rose as traders got more details about what the package will entail. According to the WSJ, the stimulus will have $250 billion to boost unemployment insurance, $301 billion to go directly to households, $349 billion to loans to small businesses, $500 billion to big businesses, cities, and industries, and $150 billion in aid to states among others. Traders believe that these numbers together with the recent actions by the Federal Reserve will help support the economy during this pandemic.
Oil price was little changed overnight even as the US started to put pressure on Saudi Arabia. Yesterday, Mike Pompeo, the secretary of state, called on Saudi to “rise to the occasion” and start to stabilize the market. The statement came a day after Pompeo spoke to Mohamed Bin Salman, the country’s Crown Prince. As such, the statement shows that the Trump administration will put more pressure and likely use tools in its position to force Saudis to act. For example, Trump could easily place sanctions or remove US troops from the country. Meanwhile, there is a concern in the oil market that the world could run out of storage space as a sharp decline in demand coincides with rising supplies.
The US dollar index weakened slightly ahead of the important jobless claims that will be released today. Analysts expect the number to rise to over a million as more people seek protection during the pandemic. Last week, the claims rose by 281k, which was significantly higher than the four-week average of 281k. We will also receive the final reading of Q4 GDP numbers, consumer spending data, and corporate profits. This data will be important but likely won’t move the market because the economic situation has changed significantly since Q4.
The EUR/USD pair rose to a high of 1.0934 as traders reacted to the new stimulus normal. On the hourly chart, we see that the pair managed to break above the upper line of the symmetrical triangle. It also moved past the important support level of 1.0890. The pair seems like it will continue moving in an upward trend in the near term. If this happens, the first resistance to watch will be 1.0945 while the second one will be 1.0985.
Dow futures rose to a high of $22000 as traders remained optimistic about the fiscal and monetary stimulus package. However, Dow futures have declined, and are trading at $20,900. On the hourly chart, the index is above the 50-day exponential moving averages and along the 14-day average. The RSI has moved from the overbought level of 70 and declined to the current level of 50 while the accumulation and distribution indicator has started moving lower. The index may pare back some gains today and possibly test the 100-day moving average of $20500.
The AUD/USD pair declined slightly from a high of 0.6076 to the current low of 0.5875. On the hourly chart, we see that the price moved below the important support shown in yellow below. The 14-day and 28-day exponential moving averages have also made a bearish crossover while the RSI has continued to decline. The pair may continue moving lower today and possibly test the support of 0.5700.