EUR/USD wavers ahead of Jerome Powell Jackson Hole speech
- The EUR/USD pair was little changed ahead of an important speech by Jerome Powell.
- The market reacted to better GDP numbers from the United States.
- Data from the BLS showed that more than 1 million people filed for initial jobless claims.
The EUR/USD pair is little changed ahead of an important speech by Jerome Powell, the Fed chair. The pair is also reacting to bettereconomic data from the United States. It is trading at 1.1800, which is in the same range it has been in the past few days.
US jobless claims fall
The number of Americans filing for initial jobless claims declined to 1.006 million in the previous week. That was a worse number than the 1 million that what analysts polled by Reuters were expecting. It was also lower than the 1.1 million that were released on Thursday last week.
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Meanwhile, the continuing jobless claims declined to 14.5 million from the previous week’s 14.84 million. That was the lowest the number has been in months. While these numbers were good, they remain significantly higher than before the coronavirus pandemic.
The claims come as several states have received approval to distribute an extra $300 per week in federal unemployment benefits that were signed by Donald Trump. These benefits, which are lower than the previous $600 are likely to incentivise more people to go back to work. According to reports, more than 47% of recipients were earning more money in benefits than in their jobs.
US economy contracted in the second quarter
The EUR/USD pair reacted mildly to the GDP numbers from the United States. According to the Bureau of Economic Analysis, the US economy contracted by 31.7% in the second quarter. That was worse than the 5.0% decline in the first quarter, which means that the economy is in a technical recession. Analysts polled by Reuters were expecting the economy to contract by 32.5%.
This decline was mostly because of poor consumer spending during the quarter because of the stay-at-home orders. As a result, consumer spending, which is the biggest part of the American economy, declined by 34.1% during the quarter. Exports also declined during the quarter.
The EUR/USD is possibly waiting for a statement by Jerome Powell, who will address participants of the virtual Jackson Hole summit. According to Bloomberg, the Fed chair is expected to talk about the bank’s review of monetary policy. In it, he will possibly talk about the new normal of low interest rates as the bank continues to grapple with the impacts of the pandemic. He could also talk about negative interest rates and yield curve control.
EUR/USD technical outlook
The daily chart shows that the EUR/USD pair has been in a strong upward trend since bottoming at 1.0630 in April this year. The pair reached a year-to-date high of 1.1958 this month. However, in the past two weeks, it has struggled for direction. Eventually, it has formed an ascending trend line that is shown in purple. The price is also above the short and longer-term moving averages.
Therefore, the outlook for the pair is neutral; for now. A move below the support at 1.1800 will be a victory for bears, which will see the pair drop potentially to the 23.6% retracement at 1.1650. On the other hand, a move above the support will likely see the price continue rising as bulls target the resistance at 1.1958.