Forex Signal (Thursday August 18, 2011 NY TIME 10:00am EDT) – US Existing Home Sales

[Stavro D'Amore]

US Existing Home Sales
Forecast 4.91M
Previous 4.77M
Pair to trade: EUR/USD

Triggers we need: BUY EUR/USD 4.50M
SELL EUR/USD 5.30M

Economical Impact: Extremely Critical
Typical Result: Good for currency
Occurrence: Released monthly, about 23 days after the month ends


About our Triggers:
US Housing sector forecasted to arrive at 4.91M. We are looking for a deviation on this trade of 400K either way. This is a very critical news release as many traders and economists will be focusing on this news release. Should this trade deviate, we will see major volatility in all US pairs. We can expect to see about 45pips on the initial spike, before another 20 pips on a double spike, before we see our required retrace.

What is it?
The Existing Home Sales measures the annualized number of existing residential buildings that were sold during the previous month. This report helps to analyze the strength of the US housing market, which helps to analysis the economy as a whole. While this is monthly data, it is reported in an annualized format (monthly figure x12). Existing homes make up the majority of total sales and therefore tend to have more impact than New Home Sales.

Why does the market care?
It's a leading indicator of economic health because the sale of a home triggers a wide-reaching ripple effect. For example, renovations are done by the new owners, a mortgage is sold by the financing bank, and brokers are paid to execute the transaction. A higher than expected reading should be taken as positive/bullish for the USD, while a lower than expected reading should be taken as negative/bearish for the USD.

Method I use to trade this:
Stavro D’Amore Trading Method
Approximately 5 minutes prior to the news release, I will be looking for a short term LONG position in EUR/USD.
I would be out of this LONG trade 2 minutes before the actual release, or to avoid any spreads that should widen.

I will look for a 30-50% retracement in the original spike before entering a trade; I will sell half my position as soon as I hit the original high point of the first initial spike and place a SL at entry price. My TP level would be just before a resistance level or if the chart decides to form a support level, looking at a 15 minute chart time frame.

I do recommend spike trading as an option when there is great uncertainty in the markets; also the liquidity is very good at the moment if you are using an ECN broker.
Historical Chart and Data for US Existing Home Sales

All the best

Stavro D’Amore

 

[ntuthuko]

Where to get news updates

Thanks for the signals stavro just one question where can I get these news updates at the exact time of release thanks keep up the good work.

 

[MBPAC94]

I don't understand how you determine to go long or short the Chart from last months US EHSC report. The market went both long and short and if you followed your strategy you would have been stopped out before any profit was made. I get your looking for deviation but something doesnt seem correct when applying the technique to last months data.

 

[Stavro D'Amore]

I don't understand how you determine to go long or short the Chart from last months US EHSC report. The market went both long and short and if you followed your strategy you would have been stopped out before any profit was made. I get your looking for deviation but something doesnt seem correct when applying the technique to last months data.

I don’t go by last months to make my move. On pre release I look at fundamentals and what the market is expecting. 8/10 this will generate pips. It wont look correct because I’m not forecasting this on last months data. If the pre news release strategy was forecasted on last months data it would have looked good.

Regards

Stavro D'Amore

 

[Stavro D'Amore]

Thanks for the signals stavro just one question where can I get these news updates at the exact time of release thanks keep up the good work.

There are many ways, You can use a Forex clicker, Bloomberg, CNBC, Reuters provide news, depending on your broker / platform you can also see the release, you can also use our trading calendar here at FPA to see the number

 

[yurps]

Notice EURUSD

Although the trigger deviation was not hit, it was -23M lower plus it came out with a very Bearish Philly Fed Index.

Notice that both the USDJPY and the EURUSD went down....

Risk Aversion flow, best to stick to USDJPY, despite the smaller pip move, this way you stay on the right side of USD data fundamentals and Risk On/Off Sentiment flows.