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42 453.14

Deep correction in the US stock market

8 September 2020

The publication of the report on unemployment in the United States was one of the key events of the past week. Let me remind you that the day before this release, sales on the stock market increased noticeably. The unemployment rate fell to 8.4% with a projected decline of only 9.8%. An unexpectedly strong improvement in this indicator did not support stock indices, as the recovery of the situation in the labor market could lead to a tightening of the monetary policy conditions of the Federal Reserve.

Over the past two trading days of the past week, the shares of most companies returned to the red zone, which may also be due to profit taking. Tesla shares remain one of the most striking examples, which lost more than 25% in value in just one week. The key reason for the massive sell-off was the 5-to-1 stock split.

Returning to today's trading day, I note that banks in the United States and Canada are closed in connection with the celebration of Labor Day. As a consequence, the volatility of trading in the foreign exchange market can remain very low, while the stock markets are completely closed. At the same time, I cannot completely eliminate the risk of unexpectedly strong price movements in the foreign exchange market, since surges often occur in the so-called "thin market".

I would like to draw your attention to the EUR / USD currency pair - quotes are squeezed in a narrow sideways range at 1.1800–1.1860 and, most likely, trading activity will remain moderate during the American session. But already on Tuesday, the excitement, both in the foreign exchange market and in the stock market, may noticeably increase.

Concluding today's review, I would like to note a fairly strong wave of sales in the oil market. By the time the US markets opened, WTI crude oil was trading below $ 39 a barrel - at least since July of this year. There are enough reasons for the sell-off, including the stock market crash. But a more significant fundamental factor exerting pressure on oil remains the fact that OPEC is increasing its oil production, while the global economy is recovering at a rather slow pace. Therefore, there is a risk of further decline in prices for black gold.



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