What do you do when the Initial Jobless Claims, which had shown signs of slowing in the past few weeks, start to rise again? This must be what the Fed policymakers are thinking to themselves, and it must also be a considerable worry for US President Donald Trump, whose re-election bid is hanging in the balance. With stimulus packages that have dwarfed the Troubled Assets Relief Program of 2008 – 2014, one would have expected the jobs market to bounce back just as the stock markets have. Sadly, this has not been the case.
So the big question is: when will the jobs return?
One thing is for sure. As long as people keep getting sick from the coronavirus in large numbers, and cities and municipalities are forced to restrict movements, ban social gatherings and effect lockdowns, the jobless claims will at best, remain where they are. But this week, the numbers are climbing.
As I indicated in a piece I wrote shortly before the US Independence holiday earlier this month, I did raise concerns about the reopening of beaches and allowing mass social gatherings to celebrate the event. Let’s be clear. In many countries, people are simply not obeying the rules: zero social distancing, not using masks, and in many cases, pure denialism. In many parts of the US, this is a big issue. Until the authorities do something about changing attitudes to help stop the coronavirus from spreading and causing new infections at record levels with each passing day, it is doubtful that stimulus packages will automatically bring jobs back.
The only US-based assets that seem to recognize this fact are the US Dollar and the USD Index, whose bearish runs have correlated with the surging coronavirus case counts in Florida, Texas, Arizona and other flashpoint states.
Technical Outlook for USD Index
The USD Index is down for the 5th straight day and is now trading at 94.84. This represents a loss of 0.12% as at the time of writing. If today’s candle closes below the 95.03 support, it would confirm the breakdown of that level and open the pathway towards the next downside target at 94.62. Below this level, 93.80 (previous low of 24 September 2018) beckons. The 11 June 2018 low at 93.17 is now starting to look relevant as the DXY declines further.
On the flip side, transient recovery could target 95.03, 95.19, 95.72 or 96.46, in that order. It would require significant improvement in bullish USD sentiment for the DXY to aim for 97.16 or 97.71, which are previous price targets now found north of the present price levels. Any rallies may present opportunities for sellers if the current sentiment remains.
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USD Index Daily Chart
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