In US, First-time claims for unemployment insurance last week fell below 1 million for the first time since March 21 in a sign that the labor market is continuing its recovery from the corona virus pandemic.

The total claims of 963,000 for the week ended Aug. 8 were well below the estimate of 1.1 million. That represented a decline of 228,000 from the previous week’s total.

“The labor market continues to improve, but unemployment remains a huge problem for the U.S. economy,” wrote Gus Faucher, chief economist at PNC Financial Services. “The number of people filing for unemployment insurance, both regular and PUA benefits, continues to steadily decline as layoffs abate. But job losses remain extremely elevated, far above their pre-pandemic level.” The Unemployment reports adds strength to dollar.

A key eurozone interbank money-market rate is trading below the European Central Bank’s own official rate for the first time in over five months, an indicator that the vast amount of cash that has been poured into the system to combat the COVID-19 crisis. The ECB has flooded the system with so much liquidity that the rate at which banks borrow from each other – Euro Interbank Offer Rate (Euribor) –  is a record low.

Three-month Euribor was trading on Wednesday at minus 0.486%, and in what is a rare occurrence and this rate is now below the ECB’s own euro overnight indexed swap (OIS), which was trading at minus 0.47%.

Three-month Euribor was trading on Wednesday at minus 0.486%, and in what is a rare occurrence – this rate is now below the ECB’s own euro overnight indexed swap (OIS), which was trading at minus 0.47%.

Peter Chatwell, head of rates at Mizuho said “The system is so flooded with liquidity that banks are essentially telling you they don’t need the money.”

EUR/USD 4 Hour Chart:

Support: 1.1767 (S1), 1.1722 (S2), 1.1674 (S3).

Resistance: 1.1861 (R1), 1.1909 (R2), 1.1954 (R3).

Favorable unemployment claim acts as a catalysts for building confidence among investors towards Dollar against Euro. We expect a bearish trend for EUR/USD.