A busy week

29.07.2014
This week promises to be very interesting. Yesterday a sharp decline in pending home sales was revealed, with a drop of 1.1% while slow growth was expected.  A rather paradoxical situation is being developed. The Fed is giving clear hints that a rate hike is around the corner, and hence the mortgage rates will crawl up. However, the Americans did not rush to buy real estate, largely because of the extremely weak revenue growth. 
 
If we consider that in the coming months the Fed plans to say goodbye to QE3, which included the purchase of mortgage bonds by the regulator, the increase in lending rates could begin in autumn. At the next FOMC meeting on Wednesday, we will likely see a reduction in QE3 by another $ 10 billion and that will be another step towards the completion of the program, in which tomorrow may remain a mere $ 25 billion. 
 
If any intrigue in the Fed decision is virtually absent, the Friday report on the U.S. labour market may present a few surprises. Let me remind you that last month’s data on new jobs came at a record level for the last few years at 288k, so we can not exclude a revision of the index. The July data is expected at 230k, which may become the fourth month in a row that the indicator goes above 200k. 
 
Against this background, it is most likely that unemployment drops to 6%, which would be the minimum value of the index since August 2008 (at the peak of the crisis, unemployment jumped up to 10.2%). In addition, on Wednesday, a few hours before the announcement of the meeting of FOMC, preliminary data on the growth of the U.S. economy in the second quarter will be revealed. Let me remind you that due to the cold winter in the first quarter the GDP sank by 2.9%. 
 
However, it is difficult to expect that the positive trend of the second quarter will be able to significantly cover the negativity of the first. GDP is likely to add no more than 3% (annualized). Of no small importance will be the quarterly data on labour costs, which will be released on Thursday. It is expected that the indicator will come out at 0.5%, above which the figure do not rise since the beginning of 2012. 
 
Overall, the beginning of the week promises to be very positive for the dollar. Moreover, very weak inflation data in the euro area is expected, which may also encourage “euro bears” to establish new lows. That is why I continue to hold my deals to sell, remaining after the take-profit last week, and I opened an additional short at the correction. 


RoboForex Analytical Department
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Forecasts presented in this section only reflect the author’s private opinion and should not be considered as guidance for trading. RoboForex bears no responsibility for trading results based on trading recommendations described in these analytical reviews.