Forex – The Dollar strengthened, but further losses are likely

By Peter Nurse

The us dollar strengthened at the beginning of the european session on Monday, following the report on employment Friday, which was better than expected. However, the gains should be short-lived, as doubts remain about the u.s. economic recovery.

Was 10: 45, the dollar index, which tracks the greenback against a basket of six other currencies, rose 0.2% to 93.562. The USD/JPY gained 0.1% to 106,01, the GBP/USD gained 0.1% to 1,3054 and the EUR/USD fell 0.2% to 1,1757.

Non-agricultural employment increased from 1,763 million in July, compared with an estimated increase of 1.6 million, said the data on Friday. The unemployment rate also declined to 10.2% in July, compared to 10.5% in June.

Although this result is better than expected, “the risk is that this eases the pressure on politicians to agree on a budget plan immediate,” said analyst James Knightley of ING (AS:INGA), in a research note.

“The trust is already under pressure, the income is compressed by the reductions in benefits and the measures of restriction of the Covid, which are detrimental to employment prospects, we are entering a difficult period for the economy,” he added.

“The employment report for the month of August is going to be worse because the economic effects of measures for the containment of the Covid-19 strike more.”

The us president, Donald Trump has kept his promise to take action the executive if the u.s. Congress is unable to reach a consensus on the latest stimulus measures in the country, through the signing of four decrees during the weekend relating to the economic aid of the Covid-19.

These decrees provide for an additional $ 400 a week for unemployment benefits, which was less than the $ 600 per week adopted earlier in the crisis. However, doubts remain as to the legality of these decrees and their impact.

During this time, White House officials and Congressional democrats expressed Sunday their willingness to make a compromise on another level of stimulus to support the economy at the point of death, but have said that no negotiations were scheduled.

From a technical point of view, looking at the dollar index, the recent “action on the award gives credit to our opinion that a phase of consolidation/correction technique is at hand,” said Marc Chandler, strategist-in-chief of the market in Bannockburn Global Forex. “A further recovery of the dollar in the short term seems likely, but does not change our outlook bearish in the longer term”.

“A hollow has been carved and tested nearly 92,50. It is potentially a double-dip. A movement above 94,00 is necessary to confirm it, while others may not be convinced before that the area of 94,50 (moving average of 20 days) is exceeded”, he added.

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