Tradervox.com (Dublin) – The weekly jobless claims dropped from 376,000 to 350,000 this week, which is a big shift from the trend experienced before. Most economists have termed this as a one-off event and is not reflective of a change in trend. Such numbers were seen at the beginning of the year, and the current figure is a new four-year low.
Despite such encouraging data, there are reasons to worry as currencies fail to react. The USD/JPY which increases on positive US data is still lower at 79.20 while the EUR/USD is still low at $1.2180. There have been credible explanations of the lower than expected data with some analysts saying this might have resulted from the celebration of the Independence Day in the US which was on July 4, which was in the middle of the week. This might have caused many unemployed people to fail to claim their benefits. Further, economists have also cited that most companies that shutdown for summer were not shut hence significantly reducing the number of unemployment claims.
The EUR/USD pair is edging closer to breaking critical support, and this might be the reason why this pair did not react as support levels show much strength. However, the pair is still at new 2-year low as investors analyze the Spanish bond performance and the FOMC data. The EUR/USD has broken the important support line of 1.22 and there is no other line prior to the critical support at 1.2150. This line was a major separator when the market collapsed after the first Greece bailout in May 2010.
The pair fell after FOMC meeting minutes showed that only two of the members support additional dollar printing as a measure to spur growth while others taking a wait and see stance. Further, bad news came from Europe, where Spain is due to receive 30 billion euros to help its financial institution. However, the government is paying dearly with the PM announcing a 65 billion euro package to solve the debt crisis in the country. This means additional VAT shooting from 18 to 21 percent, unemployment benefit cut, and cancellation of Christmas bonus. These measures will weigh heavily on the people and the market is waiting to see how people will react.