Market News & Analysis


Top Story

Initial Claims Atrocious, Stimulus Vote Still to Come

Initial Jobless Claims were released earlier today, and the number was not pretty.  Yesterday, we discussed how this number was expected to be larger than any we had ever seen before.  According to Bloomberg, the average estimate by economists was 1,500,000 initial jobless claims filed for the week ending March 21st.  The actual number was 3,283,000 vs the previous week’s number of 282,000.  This week’s data shows how badly the economy has been hit by the shutdown from the coronavirus, as the actual number was more than double the expectations!  As this is the timeliest data we have (weekly), this will now be the benchmark going forward.  Initial claims greater than this number will be negative for the economy and lower numbers will show that the worst may be behind us.   The S&P 500 and US Dollar initially went bid as this data, which suggested how important it is for congress to pass the stimulus plan to help unemployed workers.

In addition to the initial Jobless Claims data this morning,  US Fed Chairman went on the “Today” show earlier (a rare live television interview) noting that the US may already be in a recession.  He also said that the Fed will not run out of ammunition and that he expects economic activity to resume in the second half of the year.  This was an attempt for the Fed Governor to speak directly to people who may have lost their jobs or may not have day to day updates with the economic information. 

The DXY had been moving lower since yesterday afternoon.  While the US Dollar Index continued to move lower as Powell mentioned “recession”,  it briefly bounced after the initial jobless claims before resuming lower.  We wrote yesterday about the technical layout of DXY, which looked as it could be ready to resume its move higher.  The pair has since broke lower out of the pennant and US Dollar pairs, such as EUR/USD and GBP/USD have move higher (inverse relationship).  Technically, unless today’s  price move proves to be a false breakdown (which its too early to tell), then price should resume lower. There is support near the day’s lows at 99.87.  A daily close below there could indicate a continued move lower.

Source: Tradingview, City Index

Fundamentally, the case can be made for the DXY to move higher or lower.  The case for a move higher is that because there is such a huge demand for US Dollars, the price should move higher as more and more funds are needed to keep businesses afloat.  On the other hand, one can make a case that, as recently as today, the Fed said that they will provide unlimited funding, therefore flooding the markets with US Dollars.  This huge supply should push the value of the DXY lower. 

With Powell and the Initial Claims pointing towards “bad” news for the economy, the next item on the agenda will be the vote on the stimulus package.  The longer this gets delayed, the worse off those will be who lots their jobs.


Disclaimer

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

GAIN Capital Singapore Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the GAIN Capital group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), GAIN Capital Singapore Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact GAIN Capital Singapore Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither GAIN Capital Singapore Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

GAIN Capital Singapore Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.

Important Notice:

Cryptocurrencies are not legal tender currency and trading of derivatives on Cryptocurrencies are currently not covered under any regulatory regime in Singapore. Consequently, investors should be aware they do not have protection under the Securities and Futures Act (Cap. 289). Please ensure that you are fully aware of the risks.