- EUR/USD appears poised to move lower after rejection at 1.09.
- Powell’s comments on the economy and negative rates continue to bode well for the US dollar.
- US data is likely to show another 2.5 million workers filed for jobless claims in the week ended May 8.
The US dollar is extending overnight gains, sending EUR/USD lower amid risk-off action in the Asian stock markets.
At press time, EUR/USD is trading under 1.0810, representing a 0.10% decline on the day, having dropped from 1.0896 to 1.0812 on Wednesday. Meanwhile, major Asian equity indices like South Korea’s Kospi, Hong Kong’s Hang Seng, and Australia’s S&P/ASX 200 are flashing red.
Prolonged slowdown
Investors are shunning risk and buying US dollars possibly due to renewed growth concerns. Federal Reserve’s chairman warned on Wednesday that scope and speed of the ongoing economic downturn are without modern precedent, significantly worse than any recession since World War II. Powell warned that deeper and longer downturn may be seen if the Congress fails to provide additional fiscal support.
As a result, the US stocks dropped and the US dollar picked up a bid. The decline in EUR/USD seen at press time is an extension of the overnight losses triggered by the broad-based demand for the greenback.
Dollar’s strength could be also be attributed to Powell’s comment that the central bank is not looking at negative interest rates as an option. On Tuesday, the fed fund futures contracts were pricing negative rates in June 2021.
Eyes US data
The US Initial Jobless Claims, due at 12:30 GMT, is expected to show that 2.5 million people filed for first-time claims for state unemployment insurance in the week ended May 8.
Risk aversion will likely worsen, sending EUR/USD lower if the data shows a bigger-than-expected rise in the jobless claims. That would validate Goldman Sachs’ decision to raise its peak US jobless rate forecast to 25% from the previous estimate of 15%.
The final German Consumer Price Index for April, scheduled for release at 06:00, could turn out to be a non-event for markets unless the number prints significantly below estimates. In that case, the EUR may face stronger selling pressure.
Technical levels
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