Investors are highly concerned about the state of the global economy due to a surge in the number of new coronavirus cases. The-reimposition of partial lockdown measures may slow down the recovery of the global economy.
Traders are disappointed by the refusal of the US authorities to extend several emergency lending programs. Treasury Secretary Steven Mnuchin requested that the Fed should return to the Treasury the unused funds allocated under the CARES to support the Fed lending program. Meanwhile, yesterday, there was an increase in the number of initial jobless claims, indicating a resumption of employment problems.
The US dollar index, which measures the strength of the greenback against a basket of six currencies, is likely to close the trading week near a 3-month low at 92.20 with the potential for further decline. Traders are pricing in the Fed's intention to keep the rate near zero until 2023, as well as the growth of the public debt. This worrisome news is weighing on the US dollar.
The pandemic situation has also aggravated in Japan where the record increase in the number of new cases has been logged over the past day. Prime Minister Yoshihide Suga warned that the country is on "maximum alert" and urged people to do everything in their power to prevent the spread of infection. The yen halted its growth on the back of such news. It entered the sideways channel near the 103.80 level. It is likely to close this trading week at this level. Yet, technical analysis experts note that it may rebound and recover above the level of 104.05.
The yen's decline occurred mostly due to weak fundamental data. Today, Japan’s inflation report was published. Judging by the figures, Japan is in an on-going battle against deflation. In October, consumer prices fell by 0.4% over the year. The indicator was not only below forecasts but also hit a 4- year low.
However, among negative reports, there were encouraging ones. In Australia, retail sales unexpectedly rose by 1.6% in October. This was the first increase in retail sales since July, triggered largely by the opening of retail stores in Victoria in late October. High demand was recorded in cafes, restaurants, and takeaway shops.
So, the AUD/USD pair recouped some of its losses incurred the day before. However, technical analysis experts do not see the potential for further growth. They insist on the resumption of the downward movement. The bears will take full control over the pair if it drops below the level of 0.7262. If so, it may well dip to the level of 0.7222 and then to 0.7120.