No one used to care about it, but now it is arguably the most important macro data. The weekly unemployment claims hit a new record as 6.6 million people applied for it, doubling from 3.3 million the week prior. As soon as the data came out, European stock indices and US index futures, which had climbed to fresh session highs, sold off and were struggling to stay on the positive side of the open. The dollar sold off initially, but then recovered strongly on haven demand, although the USD/JPY struggled – suggesting that the yen was the strongest currency on the day.
My bearish views remain unchanged and expect to see further weakness as we approach the weekend. With a growing number of countries in lockdown and the virus still spreading rapidly in the UK and US, it is very difficult to be optimistic about the global economic outlook. Against this backdrop, any recoveries we may see in the short-term, could be sold into until such a time that the virus cases start to fall rapidly.
Indeed, this why last week I wrote that stocks were likely to face stiff resistance following a period of relative calm after the big falls earlier in March. The markets have indeed come under renewed selling pressure over the past couple of days, although they did try to bounce back this morning. However, it looks like the selling has resumed.
Here is an update chart of the German DAX:
At the time of writing, the index’s CFD was still positive on the day, but the current price action suggests a breakdown is likely. The recovery from last week only lasted until the shallow 38.2% Fibonacci retracement – not a good sign. So, if support around 9370 breaks then a drop to the next support at 9120 would become very likely. This was the point of origin of the rally last Tuesday. Thereafter, there is nothing significant until the recent lows.
Meanwhile on the upside, a break above this week’s high would be deemed bullish, for this would create our first higher high.
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