From Bad To Worse
Conditions in the US have dramatically deteriorated this year and we are now starting to see significant selling pressure emerging in the Dollar. The US economy which had already been weakened by the two-year trade war waged by the president against China has been heavily damaged by the COVID-19 outbreak which led to nearly two-months of lockdowns.
Q1 growth was seen falling to -5%, worse than during the global financial crisis, and employment in April saw record falls in job numbers with the NFPS printing -20.5 million, the lowest reading since 1933. With the economy in freefall and the death toll as a result of the virus surpassing 100k, the highest global death toll of the outbreak, things have taken a dramatic turn for the worse over the last week.
Riots Breakout As Lockdown Ends
Just as the country was starting to look beyond the virus, with lockdown measures beginning to ease and businesses beginning to reopen, a new crisis has emerged. Following the unlawful killing of African-American George Floyd last week at the hands of the police, protests sprung up across the country. These protests have swollen in size and number and have morphed into full-scale rioting in some places with 141 cities across the country confirming disruption. Last night marked the seventh night of public disorder as protestors , led by the Black Lives Matter movement, continue to demonstrate against the racial inequality and injustice which has become so prevalent in the US.
Police officer Charged For George Floyd Murder
The officer responsible for the death of George Floyd has now been charged with third degree murder, four days after the incident took place, but protests have now taken on a broader focus and many still want to see the other officers involved in the incident charged too. Despite appeals for calm from many varied voice among the corporate, political and celebrity communities in the US, scenes of police brutality against protestors – including tear gassing of protestors outside the White House yesterday, have drawn high levels of condemnation.
Trump Accused of Inflaming Situation
The president himself has been accused by many of inflaming the situation via his typically cavalier and provocative language which has included tweets threatening the shooting of looters and the danger of anyone who breaches the grounds of the White House. With the situation continuing to escalate, curfews have been installed in many cities though these have yet to deter the protests. In LA, the national guard has been deployed for the first time since the 1992 riots which came in the aftermath of the police killing of another unarmed black citizen.
However, the real fear is over what happened next. Speaking yesterday, Trump has threatened in invoke a federal law dating back to the very early 1800s to deploy the military on a nationwide basis in order to quell the disorder. With tensions running high across the country, leading to deaths of police officers and civilians alike, there are grave concerns over what could materialise if the army is deployed.
Dollar Under Pressure
The US Dollar has come under heavy selling pressure, despite its typical safe haven status, as scenes of public disorder and unrest there fuel a loss of confidence among international investors. Equity markets have so far continued to rally, though this could change if the military is deployed, leading to unprecedented conditions for the country.
DXY (Bearish below $98.25)
From a technical viewpoint. The sell-off in the Dollar futures has seen price breaking below the $98.25 level support. Price is now on course to test the yearly pivot at $97.095, which bulls will need to defend to alleviate further bearishness. However, if we break down below there, the next level to watch will be the completion of the symmetry projection from 2020 highs into the $95.99 level.
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