Forex Signal (Fri September 24 2010, 10:00am NY Time EDT) - US New Home Sales

[Henry Liu]

U.S. New Home Sales usually follows the trend of Existing Home Sales, therefore we are likely to see a worse than expected figure. Here is the forecast:

10:00am NY Time New Home Sales Forecast 292K Previous 276K
ACTION: BUY 360K USDJPY BUY 220K EURUSD or GBPUSD

The Trade Plan
We’ll trade this release using a deviation of 70K; if the release is lower, it would strengthened risk aversion sentiment and we should look to BUY EURUSD or GBPUSD; if the number is higher, it could provide a temporary support for the pair and we may see a slight rally in USD/JPY.

We'll be looking for a possible after-news retracement trade. As I have explained in previous analysis, we need to wait for the release, wait for the market to spike, and wait for decent retracement. This is the 3 "W"s of Retracement Trading system. It is especially important to make sure there is a momentum during the spike before jumping in. For more information, read:
Henry's News Trading Method.

The Market
With the general market still in shock from the FOMC Statement on Tuesday, which opened the door for future large scale asset purchases by the Feds, we'll probably see continous selling pressure on the USD

U.S. Housing sector should still remain under pressure because of high unemployment rate, low consumer consumption, tight credit conditions, and supply outpacing demands, not mentioning the expiration of New Home Buyer's Credit... However, if yesterday's Existing Home Sales is of any indication, an inline with expectation release is expected as the broader market remains generally unchanged for this event.

Additional Thoughts
Taking the context of the week which we saw some excessive weakness in the USD, market may consolidate as we getting ready to close the week... Market sentiment may change towards pro USD, therefore use caution.

Pre-news Consideration
There is no pre-news for this release.

Definition:
“Measures the annualized number of new residential buildings that were sold during the previous month. A rising trend has a positive effect on the nation’s currency because the housing market is a leading gauge for the overall economy. A high level of housing activity signals that the construction industry is healthy and that consumers have the capital to make large investments. More importantly, new housing activity creates an economic ripple effect as home owners buy goods such as appliances and furniture for their homes, and builders buy raw materials and hire more workers to meet demand.”

Historical Chart & Data For US New Home Sales


Thanks,

 

[MidnightRun]

News Profiteer

Henry,
Could you provide a link to a webpage where I can find more or less detailed overview of the News Profiteer indicator and how to use it.
Thank you

 

[Mr.Daniele]

question: Positivity or Negativity about home?

Hello Hanry

I closely followed your signals relating to the sale of houses.
I don't understand a question of signal yesterday and today;
data of prevision yesterday and today are BETTER than previous, so why you say:

YESTERDAY
US Existing Home Sales is expected to decline from previous month as current market
???

TODAY
U.S. New Home Sales FOLLOWS Usually the trend of Existing Home Sales, Therefore We Are Likely to see on Worse than expected
???

because the calendar data disagreed with your statements?

Thank's Daniele

 

[mauricio.sousa]

Stop target and loss..

Please, how much should be my Stop Target and Stop Loss???

If the news is favorable to buy USD/JPY or EUR/USD How many pips can I expect to profit??


(Sorry for my bad english)


Thanks Henry!

 

[wade pugsley]

I thought when the market was is risk aversion mode they piled into the dollar and the yen for safety. When then so do you say the EUR and GBP will rise on risk averse sentiment. I'm confused, if the release would have been lower 70K wouldn't the EUR and GBP generally lose ground?
Thanks

 

[Boko Maru]

I thought when the market was is risk aversion mode they piled into the dollar and the yen for safety. When then so do you say the EUR and GBP will rise on risk averse sentiment. I'm confused, if the release would have been lower 70K wouldn't the EUR and GBP generally lose ground?
Thanks

The dollar has been extremely weak due to the FOMC statement indicating a return to quantitative easing is possible. New Homes Sales is a very minor report anyway, but even more so after FOMC.

The idea that USD and Yen are "safe haven" currencies is generally a sound one, as in the 2008 financial meltdown, USD and Yen strengthened immensely, and it wasn't because of all the great economic news coming out of the US and Japan hehe. But just because it happened that way in 2008 doesn't mean it will now. USD has lost a lot of it's luster as a safe haven currency recently, and it's gone almost totally to Yen and to CHF to a lesser degree.

But why are we talking about risk aversion now anyway? The equity markets have been ripping this whole month; it's hardly a risk aversion environment at the moment.