USD growth and deep correction in the US stock market
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Market Watch review. 04.09.2020

In today's release, we’ll cover the following topics:

  • Correction of US stock indices.
  • USD strengthening.
  • US and Canadian unemployment report.
  • Analysis of a EUR/USD sell deal.

It's no secret that on the first Friday of every month, the US publishes a report on the changing situation in the labor market. The stock market reaction to the upcoming publication was quite interesting - a record decline over the past three months. Of course, we can talk about an obvious profit taking, but I would not be surprised if I saw an unexpectedly weak report on the change in the number of jobs created in the non-agricultural sector.

The collapse of stock indices, which I still consider as a corrective decline, supported the USD. As a result, we are seeing a significant weakening of the EUR / USD currency pair. Although the activity of sellers at 1.1800 remains very weak. Please note that the marked support level is in the immediate vicinity of the lower border of the ascending channel. A breakout of this level could trigger another wave of decline.

Now let's move on to the upcoming report on the US labor market. Let me remind you that unemployment is at record highs in more than 30 years. Therefore, the lack of a steady rate of its decline may put additional pressure on the stock market, thereby contributing to the strengthening of the USD. And in this case, the report on the change in the number of jobs created will serve as more informative for traders.

Considering all this, at the time of the publication of the report on the US labor market, we may see another wave of decline in the GBP / USD currency pair to the next technical support level at 1.3170. While the fixation of quotes above the resistance level of 1.3350 will not only cancel the bearish scenario, but also indicate the willingness of the pair to continue growing along the trend.

I will also remind you about the upcoming release of the unemployment report in Canada. The situation here is a little worse than in the US, but CAD traders need to take into account the change in oil prices. After all, their further decline will put much more pressure on the CAD than a moderately negative unemployment report.

I will conclude today's review by analyzing a EUR/USD sell deal. The trader opened a sell deal with a volume of 1 lot immediately after the breakdown and fixation of the pair quotes below the technical support level of 1.1950. The trade opening price is 1.1930. Take Profit order was set at 1.1810, 10 pips above the psychological support level of 1.1800. The profit on this trade was $ 1200.

That’s all for me. Closely monitor the news background and be prepared for all the surprises of the market.

The material published in on this page is produced by the FIBO group companies, and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC; furthermore it has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.


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