- Stimulus bill agreement possible only if many contentious issues are sorted out.
- Mixed signals in the four-hour chart.
US Treasury Secretary Steven Mnuchin and House Speaker Nancy Pelosi have reported progress in the talks to reach an agreement on the fiscal stimulus to revive the pandemic hit economy. The optimism has helped the euro along with other risk-on assets while pushing the dollar down.
EUR/USD is trading near the weekly high of 1.1755. But, the momentum might wane as many immediate risks are there for the pair.
While the Democrats pitch for more than two trillion dollars for the stimulus, the Republicans haven’t given any signs of pushing it above 1.6 trillion US dollars. Nevertheless, all the politicians want to send a cheque to everyone in the US, ahead of the presidential elections.
Senate Majority Leader Mitch McConnell and White House Chief of Staff Mark Meadows had expressed doubts over the possibility of reaching a deal. The layoff announcements from the likes of Disney, major banks, and airlines have put pressure on the policymakers to deliver on the stimulus bill. Markets might wait for it and will be content with the President’s stoppage measures for the time being, but a breakdown of the stimulus talks will send equities crashing and the dollar on the way up.
Trump’s antics and non-confirmation during the recent presidential debate also worries investors as market participants generally sell on chaos and buy on signs of stability. The incumbent President is seen as willing to question the election’s credibility, in case of his defeat, and refuses to hand over power to Biden.
The jump in the number of coronavirus cases in Europe will drag the EUR/USD as the winter effect might be chilling amidst the pandemic.
The economic data will be on closers’ immediate watch with the monthly non-farm job numbers released tomorrow. A hint towards the numbers will be from ISM Manufacturing Purchasing Managers’ Index. Headline numbers might not be disappointing, but the hiring trends might be under pressure.
The weekly jobless claims might start to fall after an unexpected jump last week. Personal Spending and Personal Income figures for August are also due this week.
ADP’s jobs report showed a jump of 749,000 private jobs, beating expectations.
In short, a reversal in the EUR/USD is possible after breaking to new weekly highs, a common shakeout occurrence in the pair.
