Tuesday, July 26, 2011

US New Home Sales Data Release - 26 July 2011

US New Home Sales usually follows the trend of Existing Home Sales, therefore we´re likely to see a slightly stronger release today. Here is the forecast:

10:00am NY Time New Home Sales Forecast 320K Previous 319K

The Trade Plan
We´ll trade this release using a deviation of 70K; if the release is lower, it would strengthen risk aversion sentiment and we should look to BUY EUR/USD. A stronger number could provide temporary support for the pair and we may see a slight rally in USD/JPY enabling us to SELL EUR/USD.

We´ll be looking for a possible after-news retracement trade. We need to wait for the release, then wait for the market to spike, and wait for decent retracement. This is the 3 "W"s of the Retracement Trading system. It´s especially important to make sure there is momentum during the spike before jumping in. 

The Market
Today´s release of US New Home Sales is likely to fall inline with analysts’ expectation of around 320K. The housing market remains under pressure in June, especially with recent Employment data showing only 18K of new jobs created and Unemployment Rate moved higher to 9.2%.

The Existing Home Sales figure released last week showed the lowest number in months, therefore we may see a similar result for the New Home Sales figure, but probably not enough to hit our surprise factor.

Additional Information
With US Debt Ceiling Debate still in the headline, a worse than expected release in today’s housing number could once again drive risk aversion up and send USD lower against other safe-haven alternatives.

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

Definition of New Home Sales
"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."