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The US Congress' efforts to take additional measures to combat the effects of the coronavirus pandemic have led to new disagreements. Yesterday, Democrats and Republicans released a document that considers stimulus measures worth $908 billion. At first, everyone supported the idea, and both parties came to an agreement. However, there were those who opposed these measures. That is why the document will hardly be passed by Congress.
The House of Representatives controlled by the Democratic party and the Senate controlled by Republicans are still arguing about the size of the stimulus package. Democrats suppose that it should exceed $2 trillion, whereas their opponents are insisting on $500 billion.
Discussions of new stimulus measures should have encouraged trades. However, the disagreement is leading to the US dollar sell-off and may even cause a slowdown in the economic recovery.
At the same time, Federal Reserve Governor Jerome Powell and Treasury Secretary Steven Mnuchin supported additional stimulus measures which may allow the country to overcome difficulties caused by the pandemic.
The coronavirus crisis could be worse than the Great Recession for companies that had high debt levels at the beginning of the outbreak, according to an economist at the Federal Reserve Bank of New York.
Organizations in the industries most affected by the pandemic, such as tourism, travel, and hospitality, could grow 10% slower than normal if the current crisis worsens to the 2007-2009 economic downturn.
As we can see investors have a lot of reasons for concern. The recent sell-off of the US dollar proves this fact.
According to the technical analysis, we can see the first significant change in the market in the last four months. The euro/dollar pair changed the structure of a long-lived sideways channel and broke the psychological level of 1.2000.
This, in turn, resulted in the resumption of a mid-term uptrend. The quote immediately reached the levels logged in spring 2018.
If the price consolidates above 1.2000, it may jump even higher despite the fact that the euro is overbought.
On December 1, the market dynamic totaled 151 pips. It is the highest daily volatility in the last 19 trading days. The coefficient of speculative operations reached quite a high level. This was proved by the impulse move.
On the daily chart, we can see that the mid-term tendency, which appeared this spring, reached 1,400 pips (+13.4%).
Today, the eurozone reported on its unemployment rate. The data surprised market participants. Economists had forecast a further rise to 8.5% from 8.3%. However, the previous data was revised. It turned out that the eurozone labor market is recovering. Thus, the unemployment rate dropped from 8.5% from 8.4%.
During the US trading session, the ADP non-farm employment change data was disclosed. Analysts had expected an advance of 410 thousand compared to the rise of 364 thousand in the previous period. However, the indicator climbed just by 307 thousand.
However, markets showed no reaction to the data. It is quite possible that news about Brexit is exerting pressure on traders. In fact, the news has already influenced the pound sterling.
On the trading chart, we can see that the quote is hovering within the levels of 1.2040/1.2085. Economists expected that after the recent rally, the pair would slide to 1.2000.
If the quote fixes below 1.2040, it may drop to 1.2000. Otherwise, the pair will continue trading within the mentioned levels. In this case, the trading strategy will be based on a break of the range.
Indicator analysis
Analyzing various time frames, we can see that technical indicators on a minute, one-hour, and daily time frames point to buy signals. That is why quotes reached new local highs.
Volatility for the week/Measurement of volatility: month, quarter, year
The volatility measurement reflects the average daily fluctuation calculated for a month/quarter/year.
At the moment, the market dynamic is 47 pips. It is a rather low reading. However, after the recent rally, a local slowdown is quite possible.
Key levels
Resistance levels: 1.2100*; 1.2450**; 1.2550; 1.2825.
Support levels: 1.2000***; 1.1890-1.1900-1.1920**; 1.1810*; 1.1700; 1.1612*;1.1500; 1.1350.
* Periodic level
** Range level
***Psychological level
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