US stocks rally as hopes of V-shaped recovery build
The euro declined today as investors continued to reflect on the robust jobs data from the United States. The numbers showed that the country’s unemployment rate dropped to about 13.3% as the economy added more than 2.5 million jobs. These numbers were significantly better than what analysts were expecting. The euro also dropped because of the weak industrial production data from Japan. The numbers showed that production declined by a record 17.9% in April after rising by 0.3% in the previous month. Analysts were expecting the production to have dropped by 7.5%. According to the statistics office, the decline was mostly because of a sharp contraction in the automobile sector.
The Japanese yen strengthened slightly against the US dollar even after the disappointing economic data from Japan. The numbers showed that the country’s economy declined by 2.2% in the first quarter. This decline was slightly worse than the 2.1% that most analysts were expecting but was better than the first estimate of 3.4%. The improvement was mostly because consumer consumption and capital expenditure were better than expected. Still, the country is facing its first recession since 2015 due to the pandemic.
European stocks were mixed as traders waited for a testimony by Christine Lagarde, the ECB chair. In Germany, Wirecard, the embattled payment company dragged the DAX index lower while the FTSE turned positive. In the United States, futures tied to the Dow Jones and S&P500 rose by more than 0.50%. If the trend continues, it means that the S&P500 will wipe its 2020 losses today. The indices are also gaining as more cities are starting to reopen. New York, the worst-affected city in the US, will start reopening, a day after it reported no fatalities since March.
The EUR/USD pair declined to an intraday low of 1.1273, its lowest level since Friday. On the four-hour chart, the price is still above the 100-day and 50-day exponential moving averages. The RSI has moved from Friday’s high of 80 to the current level of 65. This means that the price may continue declining as traders attempt to test the 61.8% Fibonacci retracement level at 1.1175.
The DAX index pared some of the earlier losses and is now trading at €12,860, which is the highest it has been since March. On the daily chart, the price is above the 100-day and 50-day exponential moving averages while the RSI has remained above the overbought level of 70. Also, the price is above the 61.8% Fibonacci retracement level. This means that the price may continue rallying as bulls target the important resistance at €13,000.
The GBP/USD pair turned lower today partly because of the overall strength of the US dollar following positive jobs data released on Friday. The pair is trading at 1.2654, which is below Friday’s high of 1.2730. On the four-hour chart, this price is above the 61.8% Fibonacci retracement level. Also, the price is attempting to form the handle part of the cup and handle pattern, which implies that it could move lower and retest the 61.8% retracement at 1.2500.