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Treasury Secretary Steven Mnuchin on Wednesday offered a $1.62 trillion COVID-19 relief proposal in talks with Speaker Nancy Pelosi.

More state and local assistance in the deal is something of a small breakthrough as it is more than what GOP negotiators have to date offered.

Rollcall reported that ”a person briefed on Mnuchin’s plan said it included $250 billion for state and local governments, which is $186 billion less than Democrats want in their latest $2.2 trillion package, but $100 billion more than the White House offered in talks that broke down over the summer.”

Mnuchin has been reported to have proposed a $400 per week federal benefit, retroactive to Sept. 12 and lasting through Jan. 1, 2021, according to the source, who described the package on condition of anonymity.

This is a tactical variation from where the $600 a week that the Democrats want, but $100 more than Senate Republicans were laying on the table. 

Market implications

This a little more detail to spark up renewed hopes of a deal.

It is a small sign of progress for which might embolden the bulls on Wall Street on Thursday when Nancy Pelosi and Mnuchin have agreed to continue negotiations.

 A breakthrough should have some implications for forex. 

The US dollar has been on the defensive at times of risk-on and it would be expected to stay vulnerable to elevated risk appetite. 

However, there is a strong case for the upside from a technical perspective as illustrated in the following analysis:

The 5-wave scenario rhymes perfectly with a longer-term perspective and a Reverse Head and Shoulders pattern on the weekly chart:

Moreover, markets are expecting stimulus, for a long time to come, so it could turn out to be a sell-the fact outcome.