24.07.202009:33 Forex Analysis & Reviews: Rise in the number of applications for unemployment benefits in the US locally supported the dollar (EUR/USD and USD/CAD pairs may correct before the dollar continues to weaken)

On Thursday, the mood of investors on the markets was somewhat spoiled by negative data from the US labor market, which provided local support for the US dollar and the demand for defensive assets.

According to the data presented, the number of applications for unemployment benefits last week rose by 1,416,000 against the forecast of maintaining their number at the level of the previous week of 1,300,000, but the numbers were not only disappointing for the last week, but also for the previous one, when they were revised in the direction of increasing the number of applications from 1,300,000 to 1,307,000. 7,000 is a little on the scale of a country like the United States, but the dynamics are important, and they are depressing.

The labor market data show that its recovery continues to be highly dependent on the situation with COVID-19, because it was the surge in new infections across the country, and especially in the states of California, Florida and Texas, that led to the resumption of some quarantine measures, which caused new reductions in the number of employees due to plant closures.

Of course, on the wave of these data, the US dollar received support, but, as it seems to us, its strengthening will still be limited, since, as expected, mass production of vaccines against the coronavirus that has exhausted everyone will begin in September. It can be recalled that the recent tests from different laboratories for the development of vaccines showed a positive result, which means that wider studies that have already begun in July and August will actually sign a verdict on the "strong" dollar as a safe haven currency and transfer it to the rank of a funding currency, as it is already it was after the 2008-09 crisis.

We expect that, in general, world markets will either grow weakly or consolidate in a sideways range until the announcement of the start of vaccine production, in order to then "shoot" on the general growth of positive mood and expectations that the COVID-19 pandemic has come to an end.

Today, we should pay attention to the publication of data on retail sales and their volume in the UK, to the values of the PMI in the manufacturing sector in Germany, the eurozone, the US and the UK, as well as to the PMI in the services sector in the US and UK. In addition, the data on new home sales in America and the number of operating drilling rigs from Baker Hughes (USA) will certainly be interesting.

Forecast of the day:

The EUR/USD pair is consolidating at the level of 1.1615 after reaching it. It is locally overbought and may decline to 1.1535 against the background of the correction on the European stock market, although it will potentially retain the ability to further rise.

The USD/CAD pair is consolidating at the level of 1.3430. If oil prices decline again, the pair, breaking this level, will also rise to the level of 1.3500. But it is likely to continue to decline to 1.3315 again.