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·      EUR/USD Price Analysis: Pressured below 200-HMA inside short-term triangle

EUR/USD drops to 1.0815 during the early Monday trading session. In doing so, the quote stays depressed below 200-HMA while also staying inside a short-term triangle formation.

Although the pair’s immediate failures to cross 200-HMA drags it towards 1.0800 mark, the formation support, at 1.0775 now, will keep the sellers in check.

Should there be a clear break below 1.0775, April month bottom surrounding 1.0730/25 will be the bears’ favorite.

On the contrary, an upside break of 200-HMA level of 1.0823 will push the pair towards a three-day-old resistance line, at 1.0840 now.

Though, the pair’s further rise past-1.0840 will be hindered by the said triangle’s resistance line near 1.0860.

 

·         Treasury yields rise as investors digest Powell’s outlook for the economy

U.S. government debt prices were lower Monday morning as investors reacted to comments from Federal Reserve Chairman Jerome Powell following last week’s market losses.

At around 3 a.m. ET, the yield on the benchmark 10-year Treasury note was up at 0.6452% and the yield on the 30-year Treasury bond had risen to 1.3509%. Yields move inversely to prices.

Powell told “60 Minutes” in an interview aired Sunday night that the U.S. economy could shrink by more than 30% in the second quarter as the full impact of nationwide lockdowns forced by the coronavirus pandemic is realized, but will likely rebound robustly and avoid a long-term depression.

 

·         Ties between Washington and Beijing continued to fray on Sunday. U.S. Secretary of State Mike Pompeo warned China not to interfere with the work of American journalists in Hong Kong, suggesting that it could affect the U.S. assessment of the special administrative region’s status.

China’s commerce ministry on Sunday voiced its opposition to the latest U.S. rules imposed on tech giant Huawei and said it could take any necessary action to safeguard Chinese firms’ rights and interests.

There is no major U.S. economic data due Monday.

Auctions will be held Monday for $63 billion of 13-week Treasury bills and $54 billion of 26-week bills.

·      Britain is still in talks with France over whether French travellers should be exempt from a requirement for a 14-day quarantine when they arrive in the United Kingdom, culture minister Oliver Dowden said on Monday.

The two countries had said earlier this month that Britain would not impose quarantine to travellers coming from France at this stage but Britain has still not set out the full details.

·      Big technology companies that are reaping gains as result of increased reliance on online systems during coronavirus quarantines and lockdowns should work to increase access to the digital economy for all, the head of the IMF said on Friday.

International Monetary Fund Managing Director Kristalina Georgieva told an event hosted by Politico that the crisis was devastating the global economy, but it also offered an opportunity to tackle persistent inequality and other priorities such as climate change, if recovery funds were properly focused.

·      Japan’s economy slipped into recession for the first time in 4-1/2 years in the last quarter, putting the nation on course for its deepest postwar slump as the coronavirus crisis ravages businesses and consumers.

The world’s third-largest economy contracted an annualised 3.4% in the first quarter, preliminary official gross domestic product (GDP) data showed, less than a median market forecast for a 4.6% drop.

The slump came on top of an even steeper 7.3% fall in the October-December period, with the consecutive quarters of contraction meeting the technical definition of a recession. Japan last suffered recession in the second half of 2015.

·      U.S. lawmakers and officials are crafting proposals to push American companies to move operations or key suppliers out of China that include tax breaks, new rules, and carefully structured subsidies.

Interviews with a dozen current and former government officials, industry executives and members of Congress show widespread discussions underway - including the idea of a “reshoring fund” originally stocked with $25 billion - to encourage U.S. companies to drastically revamp their relationship with China.

 

 ·         Powell says GDP could shrink more than 30%, but he doesn’t see another Depression

The U.S. economy could shrink by upwards of 30% in the second quarter but will avoid a Depression-like economic plunge over the longer term, Federal Reserve Chairman Jerome Powell told “60 Minutes” in an interview aired Sunday.

The central bank chief also conceded that jobless numbers will look a lot like they did during the 1930s, when the rate peaked out at close to 25%,

However, he said the nature of the current distress coupled with the dynamism of the U.S. and the strength of its financial system should pave the way for a significant rebound.

He said that growth could return in the third quarter.

“I think there’s a good chance that there’ll be positive growth in the third quarter. And I think it’s a reasonable expectation that there’ll be growth in the second half of the year,” Powell said. “I would say though we’re not going to get back to where we were quickly. We won’t get back to where we were by the end of the year. That’s unlikely to happen.”

Among the factors that he said are different from the Depression era are an activist Fed and a Congress that already has passed close to $3 trillion in rescue funds and is contemplating another round. Also, the cause of this downturn is not an asset bubble or another associated more fundamental reason but rather a self-induced economic freeze brought on by efforts to combat the coronavirus.

Those efforts have led to 36.5 million Americans filing unemployment claims over the past two months and an unemployment rate currently at 14.7% and headed higher.

The Atlanta Fed estimated Friday that the data so far in the second quarter suggest a drop in GDP of 42%. That would be far and away the worst the U.S. has seen.

Powell did not speculate on what shape the recovery would take, but estimated that the U.S. ultimately will get to where it was before the virus hit — in the midst of the longest expansion in U.S. history. He cautioned, though, that a full recovery may not happen until a vaccine is found for the coronavirus.

“So in the long run, I would say the U.S. economy will recover,” he said. “We’ll get back to the place we were in February; we’ll get to an even better place than that. I’m highly confident of that. And it won’t take that long to get there.“

·         Anti-lockdown protests were seen across Germany at the weekend as fatigue over restrictions grows in the region’s largest economy, and beyond.

A number of protests against the government’s coronavirus policy and restrictive measures took place in various Germany cities, including Berlin, Munich and Stuttgart, on Saturday.

More than 5,000 people gathered in Stuttgart, with police having to direct protesters to different locations in order to maintain social distancing measures, public broadcaster Deutsche Welle reported. Another 1,000 people demonstrated at the site of the now-canceled Oktoberfest beer festival. In Berlin, more than 1,000 police were deployed to demonstrations at several sites, Reuters reported.

·      Oil prices climbed by more than $1 a barrel on Monday, supported by output cuts and signs of a gradual recovery in demand amid easing coronavirus curbs, with U.S. oil showing no signs of last month’s contract expiry price rout.

Brent crude LCOc1 was up $1.33, or 4.1%, at $33.83 a barrel by 0634 GMT, after touching its highest since April 13. U.S. West Texas Intermediate crude CLc1 was up $1.65, or 5.6%, at $31.08 a barrel, after rising to its highest since March 16. The more active July contract CLc2 was at $31.05, up $1.53.