July 25, 2017 /Yassine Maaroufi/ -- The USD index measuring the average value of the USD against a basket of currencies is on the downside since the beginning of the year. It clearly broke with the uptrend in the end of April after bursting through a year strong support line. The index is heading towards the 200 moving average where it could possibly bounce. Globally its evolution gives a hint over the bearish perspective of the USD.

The USD has been battered by the political climate in Washington where the US President is going from scandal to scandal. Talk of potential collusion between Russia and the Trump clan and the influence of the former on the outcome of the US presidential election is getting increasing attention. Unknowns surrounding how it will all unfold are keeping markets on their toes.

On the economic side, the US real estate sector is trailing other sectors as shown by the retreating figures for second hand houses sales. About 460,000 houses changed hand in the previous month compared to over 468,000 two months ago. The 1.8% fall leaves uncertainty regarding the health and liquidity of the secondary housing market as well as the capacity of the US consumer to afford a home.

Later in the week the Conference Board Consumer Confidence indicator is expected to give a glimpse of the US consumer’s confidence in the economy. The University of Michigan is also releasing confidence figures at the end of the week. The job market is anticipated to weaken with a rise in unemployment claims.

A depressed business activity is also on the horizon with investments made by companies consistently below forecasts for the last few months. The tighter job market is expected to keep employment cost relatively low which might help companies hire more to plug gaps in their human resources needs.

The Federal Reserve will announce its Federal Funds rate, which is expected to remain unchanged. Members of the US central bank will speak publicly throwing hints on the future monetary policy and the state of the economy. Their intervention will lead to the release of inflation data. GDP figures will be released by the end of the week. A solid 2.5% growth rate is on the table. The figure pales with that released by China lately at 6.9% but hovers slightly above that of Germany the biggest European economy.

French and German flash manufacturing and services PMI indicators were expected this Monday. Their figures were deceiving and well below forecasts. An exception was the French Flash Manufacturing PMI that is just above estimates. In the following days German Business Climate figures will highlight managers confidence in the economy. The scheduled German and Spanish inflation numbers will reveal the health of the Eurozone economy.

The EURUSD chart mirrors that of the USD index with a clearer upside potential for the EUR. While economically not very performing, the Eurozone has been more stable politically than its North American counterpart which contributed to the strength of the Euro.