US dollar index firms as the US sheds more than 5.2 million jobs in a week
The US dollar index rose today as investors rushed to safety following a series of negative data. Yesterday, data from the United States showed that industrial production had dropped to the lowest level since the 1940s. Retail sales also dropped by about 8% while manufacturing production in New York dropped to an all-time low. Other recent data have shown a slump in mortgage applications, manufacturing, and services PMIs.
Today, data from the Labour Department showed that initial jobless claims rose by more than 5.2 million in the previous week. This was lower than last week’s data of more than 6.6 million. The number means that more than 21 million jobs have been lost in the past four weeks. In contrast, the US had created more than 24 million jobs since the last financial crisis. Other data showed that housing starts dropped to 1.2 million in March while building permits dropped by more than 6.8%.
European equities were in the green today as investors welcomed measures by Germany to reopen the economy. In a statement, Angela Merkel said that the country would reopen gradually while observing social distancing measures. Some schools will reopen while some businesses like small shops will be allowed to operate. Still, bigger businesses and events will not be allowed. The concern of reopening is that the disease could spread. A good example is Spain, which has seen more cases and deaths after it reopened a week ago. Meanwhile, Volkswagen shares fell after the company withdrew its annual guidance after a drop in Q1 profits.
US futures rose as investors continued to react to corporate earnings from big companies. In a report, Morgan Stanley posted a 32% drop in quarterly profit. The profit dropped to $1.59 billion, down from $2.34 billion a year ago. Earnings per share dropped to $1.01 from $1.39 last year. The company’s results were offset by its trading division, which rose by more than $2.42 billion. Meanwhile, Blackrock, the biggest money manager in the world, earned $806 million from a revenue of $3.7 billion. Revenue rose by 11% while net income dropped from $1.05 billion a year ago. The company attributed the strong performance to higher-than-expected inflows.
The EUR/USD pair was little changed today as investors digested data from the US and the EU. The pair dropped to a low of 1.0850 and then pared back some of those gains. The price was the lowest it has been since last week. On the hourly chart, the price is slightly below the short and longer-term moving averages. It has also formed a double bottom at the lowest point today. The pair may continue the downward trend if it crosses the support of 1.0850.
The USD/CAD pair held steady today even as the price of crude oil rose. This was partly because of the overall strong dollar. On the four-hour chart, the price has been stuck at the 14-day exponential moving averages. It is also stuck along the 50% Fibonacci Retracement level. The RSI, meanwhile, has dropped from yesterday’s high of 86 to a low of 58.10. The pair may move lower and attempt to retest the 38.2% Fibonacci Retracement level of 1.4043.
The EUR/CHF pair declined to an intraday low of 1.0515, which is a few pips above the YTD low of 1.0505. On the four-hour chart, the price is below the 14-day, 28-day and 100-day EMAs. The RSI has also moved to the oversold level of 70 while the momentum indicator has slipped below 100. The pair may continue dropping and possibly test the YTD low of 1.0515.