For the second consecutive week, Initial Jobless Claims are lower than expected while Continuing Jobless Claims are higher than expected. How does that square?
Remember that last week NFP data suggested that unemployment was up, while employment also increased. This suggested that the participation rate increased, meaning that people would once again enter the pool of employment/unemployment and start searching for new jobs. In general, as we had discussed then, this is a positive sign for the US economy as it appears that people tend to do this only when they feel that the wages they are being offered are worth it. Taking a step back, having wages being worth it means that employers are searching for people and they are willing to pay more than before, something which is also in accordance with the NFP release.
Thus, the recent data release is supportive of the previous statements suggesting that the overall feeling is that the US economy is continuing to prosper, despite the sluggishness in growth, which can be attributed to the short-term debt cycle.
The Dollar reacted strongly to this piece of information, as it gained 25 pips upon the announcement, following the previous trend. The Dollar is currently trading around 1.1520 against the Euro after President Trump’s comments, trying to break through the 1.1519 Support point (Fib. 61.8%), making it a Resistance if it manages to close below it. Otherwise, the next resistance point stands at 1.1569 (Fib. 100%).
The Dollar’s future could lie in the Fed Chairman’s comments today which, if seen as dovish, could be perceived as Dollar weakness.
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Dr Nektarios Michail
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