The dollar index started the trading week with a small downward gap, and it slowly fell on Monday during the Asian session, returning to the area of the 96th figure. The greenback lost all the gains it made last week, once again demonstrating its vulnerability and in a certain sense – unreliability. Against the background of fairly strong nonfarm (with the exception of the inflationary component), the US currency could well develop a rally, especially since other macroeconomic reports (the ISM manufacturing index, consumer confidence indicator) also came out in the green zone, confirming the gradual recovery of the US economy. But all the achievements of the American economy are offset by the coronavirus, which continues to spread actively on the territory of this country. The United States is updating anti-records, while the pace of COVID-19 distribution around the world is gradually slowing. Coronavirus has become the #1 topic for dollar bulls, and the corresponding news flow does not contribute to the growth of the US currency.
According to the World Health Organization, the US accounted for 53,000 of the 212,000 new infections in the world last Friday. The upward trend is observed in the southern and western states of the country – many of them were among the last to introduce strict quarantine restrictions at the beginning of the epidemic, but they were the first to begin to lift them. Some states reported a record daily increase in the number of confirmed COVID-19 cases over the weekend. First of all, we are talking about Florida – 11,460 cases were recorded there on Saturday alone. This anti-record is second only to the record that was registered in new York in mid-April, that is, at the peak of the epidemic – 11,570 patients were detected there in 24 hours. Texas is another hot spot on the map of the USA. 8,258 positive tests for COVID-19 were registered in this state on Saturday. Many other states in the country have also updated anti-records, including North Carolina, South Carolina, Tennessee, Alaska, Missouri, Idaho, and Alabama. It is noteworthy that repeated outbreaks are recorded as the quarantine restrictions in these regions of the United States are relaxed. Along with Texas and Florida, the most severe situation persists in Arizona: according to recent reports, about 25% of all tests for COVID-19 came back positive.
Investors are concerned about the trend itself. For example, if from June 8 to 24, the daily increase in infected people in the United States fluctuated in the range of 15-25,000, then from June 24, this indicator began to show a stable upward trend, exceeding the 30,000 mark and then the 40,000 mark. In early July, the United States updated the anti-record several times when the indicator exceeded the 50,000th level. And the current decline in the dollar index is also associated with coronavirus, given the divergent dynamics in the world and in the US. So, over the past day, COVID-19 was detected in 75,499 people in the world – this is 14,188 fewer cases than it was the day before. However, the incidence rate is still at a high level in the United States: 44,530 patients with coronavirus were registered there on Sunday.
The White House, for its part, remains calm. Commenting on the latest anti-records, US President Donald Trump on Saturday once again said that the growth of coronavirus in the United States is associated with an increase in the number of tests. Earlier, he had already voiced this idea, and at the same time made it clear that Washington is not going to re-close the country to quarantine. White House officials also oppose the lockdown – but they also recognize that local authorities can tighten quarantine restrictions at the federal level. At first, this position provided background support for the dollar. But now, when the alarming trend is observed in almost all the southern and western states of the country, the US currency's immunity has weakened. After all, the authorities of these states can return strict quarantine at the local level, which in total will be comparable to a large-scale nationwide lockdown. At the same time, the next spike in the incidence is expected in the coming days – the United States will feel the consequences of the Independence Day celebrations (the incubation period of COVID-19 is on average 4-5 days).
Therefore, the US currency may come under additional pressure this week. As we can see, macroeconomic reports by and large do not work, no matter how rosy they are - they only have a temporary impact on the mood of investors. While the rate of spread of coronavirus in the United States is of great concern to traders. According to the country's chief epidemiologist, if the current trend continues, the United States will face a 100,000 a day increase in infected people in the foreseeable future. Therefore, if the daily increase exceeds the 50,000 mark again this week, the dollar will weaken throughout the market.
If we talk about the EUR/USD pair, the price was able to overcome the average line of the Bollinger Bands indicator (on the daily chart) during the Asian session on Monday. If the pair is pinned above 1.1260, the Ichimoku indicator will form a bullish Parade of Lines signal, which will allow you to rise to the next resistance level of 1.1350 (the upper line of the Bollinger Bands on the same timeframe).
