The dollar index was flat during the Asian session on Monday, showing a pessimistic mood. Friday's optimism faded, and the weekend's events failed to inspire dollar bulls to conquer new heights. Moreover, the current situation in the United States "smacks" of a political crisis that can turn against the dollar. The coronavirus is also putting background pressure on the greenback, as the US has passed the five million milestone in the number of cases. In other words, the US currency showed its vulnerability again when trading began. Therefore, assessing the dollar's growth from last Friday, we can assume that it was just a large-scale correction – to break the trend, dollar bulls lack political stability and positive news from the "medical front". On some Nonfarm data, figuratively speaking, "you won't get far".
So, the main news of the weekend is that US President Donald Trump bypassed Congress and signed four executive orders to provide assistance to victims of the pandemic. At first glance, this is good news for dollar bulls, who have been waiting for several weeks for the passage of an agreed-upon one-trillion-dollar bill. But in fact, Trump only worsened a rather difficult situation by making questionable decisions in the legal sense.
As mentioned above, Trump issued four decrees. First, it has partially reimbursed additional unemployment benefits for tens of millions of Americans who have lost their jobs due to the coronavirus pandemic. These payments, which will reach $400 a week (up from $600 previously), will be 75% funded by the federal government and 25% by the states. They will be produced until December 6 of this year. The federal government will channel funds from the Emergency Relief Fund for these needs - a total of about $44 billion.
The rest of Trump's decrees provide for a deferral of payroll tax payments for people earning less than $100,000 a year, an extension of the moratorium on student loans, and measures to help tenants and homeowners.
According to Bloomberg, these decrees are "very, very controversial from a legal point of view," as in accordance with the US Constitution, only Congress decides on government spending. A similar position has already been voiced by representatives of the Democratic Party. According to them, Trump has exceeded his powers, therefore, the decrees he signed can be challenged in court.
Trump, by and large, does not deny the controversy of his actions. Commenting on the situation, he said that he "was forced to take such measures" because negotiations in Congress reached an impasse, Republicans and Democrats did not agree on the amount of this assistance, and additional payments to unemployed Americans were stopped on July 31. Therefore, he "was forced" to take such steps, figuratively speaking, "saving America."
Naturally, such decisions of the incumbent president should be viewed through the prism of the November elections. Trump loses to his main competitor in many ways 100 days before the "X-hour". Joe Biden has already said that the head of the White House has taken "a number of half-baked measures." According to him, these actions are "another cynical trick" of the president, who wants to divert attention from his responsibility for the failure of politics in the crisis. House Speaker Nancy Pelosi (Democrat spokesman) also made it clear that the Trump administration simply failed to come to terms with the Democratic Party. She said the Democrats have proposed a compromise, agreeing to reduce the size of the planned aid package from 3 trillion to 2 trillion. However, the White House, which pushed for $1 trillion in aid, turned down the offer.
As a result, the decrees signed by Trump failed to support the dollar. First, with a high degree of probability, they will be appealed in court. Secondly, even if they remain in force, they can be considered as a kind of "patch" - according to some experts, even one trillion dollars, which was discussed in Congress, could not fully help the American economy in the context of overcoming the coronavirus crisis. Now that Trump has resorted to populist half-measures, negotiations between congressmen are likely to stall completely - and this fact will put additional pressure on the dollar.
In the meantime, the situation with the coronavirus in the United States continues to be difficult. Last week, Trump made a loud statement that "the virus is receding", but the daily incidence continues to be high. For example, 47,000 new patients were identified yesterday, and 56,000 infected the day before yesterday. The total number of people who have become infected with COVID-19 in the United States has already exceeded five million people since the beginning of the pandemic - this is the largest figure in the world.
Thus, the dollar starts the trading week in difficult conditions. Today, the macroeconomic calendar for EUR/USD is practically empty, so traders will react to the near-market news flow, including regarding the prospects for the implementation of the Trump decrees.
From a technical point of view, the EUR/USD bulls need to overcome the 1.1805 mark (Tenkan-sen line on the daily chart) - long positions to the borders of the 19th figure can be considered only in this case. Until this moment, you are advised to take a wait-and-see attitude, since judging by the uncertain dynamics of the dollar index, the market has not yet decided on the vector of its movement, while Trump unexpectedly "mixed all the cards" by redrawing the fundamental picture for dollar pairs.
The material has been provided by InstaForex Company - www.instaforex.com