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Forex – Dollar Edges Higher, But More Losses Look Likely

imageForex3 hours ago (Aug 10, 2020 03:05AM ET)

By Peter Nurse – The dollar edged higher in early European trade Monday, following Friday’s better-than-expected employment report. However, gains are likely to be short-lived as doubts remain about the U.S. economic recovery.

At 3:05 AM ET (0705 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was up 0.1% at 93.477. USD/JPY was flat at 105.94, GBP/USD traded up 0.1% at 1.3062 and EUR/USD was down 0.1% at 1.1772.

Non-farm payrolls rose by 1.763 million in July, against the estimated 1.6 million increase, data showed on Friday. The unemployment rate also fell to 10.2% in July, compared to June’s reading of 10.5%.

While this was a better than expected result, “the risk is this eases the pressure on politicians to agree on an immediate fiscal deal,”said analyst James Knightley at ING, in a research note.

“With confidence already under pressure, incomes being squeezed by benefit cuts and Covid containment measures hurting job prospects, we are entering a more challenging period for the economy,” he added.

“The August jobs report is going to be worse as the economic effects of Covid-19 containment measures increasingly bite.”

U.S. President Donald Trump kept his promise to take executive action if the U.S. Congress failed to reach a consensus over the country’s latest stimulus measures, signing four executive orders over the weekend related to Covid-19 economic relief.

The orders would provide an extra $400 per week in unemployment payments, less than the $600 per week passed earlier in the crisis. However, doubts remain about the legality of the orders and whether they would have the desired impact.

Meanwhile, White House officials and congressional Democrats on Sunday expressed a willingness to compromise on another stimulus package to bolster the stalled economy, but said no talks were planned.

From a technical point of view, looking at the dollar index, the recent “price action lends credence to our view that a technical consolidative/corrective phase is at hand,” said Marc Chandler, Chief Market Strategist at Bannockburn Global Forex. “Further near-term dollar recovery looks likely but does not change our longer-term bearish outlook.”

“A bottom was carved and tested near 92.50. It is potentially a double bottom. A move above 94.00 is needed to confirm it, though others might not be convinced until 94.50 area (20-day moving average) is surpassed,” he added.

Forex – Dollar Edges Higher, But More Losses Look Likely

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