EUR/USD: Dollar index rises ahead of FOMC minutes and jobless claims

EUR/USD: Dollar index rises ahead of FOMC minutes and jobless claims

  • The US dollar index rose as the market waits for the FOMC minutes and initial jobless claims data.
  • Economists polled by Bloomberg expect the claims to have increased by 5 million in the previous week.
  • Analysts at JP Morgan expect the jobless claims to have risen by more than 7 million.

The US dollar index rose by 0.40% ahead of the weekly jobless claims data and the FOMC minutes. The EUR/USD dropped by 25 basis points while the dollar rose by 0.60% and 0.20% against the Australian dollar and pound respectively. The index has risen by more than 3.5% year-to-date.

Dollar index rises

Dollar index rises

US coronavirus cases soar

The number of confirmed Coronavirus cases continued to rise in the United States. According to the government, almost 400k Americans have been infected with the disease. About 12k people have died while 22k people have recovered. Still, experts expect the curve to start flattening as most Americans embrace social distancing and working from home.

In Europe, Coronavirus curve has started to flatten, and several countries like Belgium, Spain, and Italy are considering easing up. Still, there are concerns about secondary infections as people go back to work.

In Japan, the number of cases is expected to increase as the government launches a $1 trillion stimulus package. In China, the number of cases has also been rising. Questions have been asked about the accuracy of these numbers though. All this could affect the US dollar index, because the USD is often seen as a safe-haven.

US jobless claims eyed

The market is now eying the initial jobless claims data that will be released tomorrow. Economists polled by Blomberg expect the jobless claims numbers to rise to about 5 million. This will be lower than the 6 million claims filed a week before. This will bring the past three-week total to almost 15 million, which is a historic number.

Other analysts are less optimistic. Economists at JP Morgan (NYSE: JPM) expect the initial jobless claims to have risen by 7 million in the past week. Another analyst has predicted that the claims will hit 25 million as the Coronavirus pandemic remains.

This week’s data could reflect an additional number from Florida, which adopted a stay-at-home order last week.

At the same time, more American companies have continued to furlough their employees. Yesterday, TJX announced that it would furlough most of its employees and slash executive pay. The same was the case with Tesla (NASDAQ: TSLA), which will furlough employees until May 4.

Meanwhile, the Trump administration is talking about another round of stimulus. Trump himself has supported launching a $2 trillion fund to fund the country’s infrastructure. Yesterday, Steven Mnuchin submitted a request for $250 billion for small businesses.

FOMC minutes eyed

The market is also eying the FOMC minutes for the meeting held three weeks ago. These minutes are important because they tell the market a picture of the deliberations among members. In the previous meeting, the committee lowered rates by 0.25% in response to the Coronavirus meeting.

The members then cut rates again by 100 basis points as the disease turned out to be a pandemic. Later on, they launched an open-ended quantitative easing, which has so far expanded the Fed balance sheet by more than $2 trillion.

In the FOMC meetings, investors and analysts will find the thinking of the committee and gauge what they are planning in the next few weeks.

EUR/USD technical outlook

EUR/USD technical analysis

The euro has the biggest weighting in the US dollar index. Looking at the hourly chart of the EUR/USD pair, we see that the pair double bottomed at around 1.0771 on Friday and Monday. The pair has then pared back some of the gains made yesterday and is trading at 1.0862. The 14-period and 28-period exponential moving averages are attempting to crossover while the RSI has been declining. The pair will likely continue falling and possibly test the 1.0800 support.

By Crispus Nyaga
Crispus Nyaga is a finance analyst and trader with more than 7 years industry experience. He's contributed to some of the leading financial brands in the world including Seeking Alpha, MarketWatch, Forbes, and Crispus has an excellent understanding of global macroeconomic and geopolitical issues, is a big fan of golf, and lives in Nairobi with his wife, son, and nephew.

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