US Existing Home Sales is expected to decline from previous month as current market situation is adding more pressure to the housing sector. Here’s forecast:
Existing Home Sales Forecast 4.70M Previous 5.37M
ACTION: USD/JPY BUY 5.10M SELL 4.30M
The Trade Plan
Because the Housing sector is one of the most important news events out of the US, this release will certainly cause some volatility in the market, especially if our tradable figures (+/- 400K) were hit. With the focus of the nation, and of the world, on the status of U.S. housing sector, this release may bring about a strong sentiment of risk appetite/aversion if our BUY/SELL trigger is hit…
If our buy tradable deviation is hit, or 5.10M figure is released, we should look to BUY USD/JPY (or GBP/JPY) after the release. If our sell tradable deviation is hit, or 4.10M figure is release, we should look to SELL USD/JPY (or GBP/JPY) as risk sentiment should turn towards aversion.
We’ll be looking to trade this release using the after-news retracement trading method. We’ll wait for the release, wait for market reaction, and wait for retracement before jumping in.
The Market
The outlook for US Housing sector is bleak at best. With the expiration of the New Home Buyer’s credit, we are expecting to see an almost 14% decline from last month’s figure. And this same condition is likely to remain for at least until late 2011 because the supply of both existing and new homes exceeds demand, combining that with tough credit conditions, high unemployment rate, and record number of initial jobless claims, US housing sector is not expected to recover anytime soon.
Additional Thoughts
This release is scheduled at 10:00am US Time, it is the last high impact news for the NY session, we could see some exaggerated market movements as traders may just wait for this release to be out of the way before committing to a position.
Pre-news Considerations
Since the general sentiment for this housing sector is pretty much unchanged, and being that this is not a trend changing event, I’d stay away from pre-news.
Definition:
“Measures the annualized number of existing residential buildings that were sold during the previous month. A rising trend has a positive effect on the nation’s currency because large purchases tend to be made by consumers that are optimistic and confident in their financial position. The sale of a home also triggers commissions for real estate agents, and often home owners will purchase goods such as appliances and furniture shortly after purchasing a home. Traders watch this report closely as it’s the month’s first demand-side housing indicator to be released.”
Related posts:
- Forex Strategy For US Existing Home Sales 07/20/11
- Forex Analysis For US Existing Home Sales 09/21/11
- Forex News Trading US Existing Home Sales 06/21/11
- Forex Trading News US Existing Home Sales 08/18/11
- Forex Strategy For US New Home Sales – August 23, 2011
- US New Home Sales Forex Trading Plan 10/27/10
- Forex News Trading US New Home Sales m/m 03/23/11
- Forex News Trading US New Home Sales 02/24/11
- Forex Trade Signal For US New Home Sales 09/24/10
- Forex Trading Plan For US New Home Sales 08/25/10
{ 17 comments… read them below or add one }
Hi Henry,
I’ve decided to trade USD/JPY when Exisiting Home Sale came out with worse then expected as your recomendation.. but after i jumped the market suddenly stuck to move lower then i just put my SL 30pips for my risk on this event so it hit my SL after that..
Now I realized the problem was actually bec USD/JPY was down for almost whole day 150pts and it could not be lower then that price.. (Is it bec JPY is on deflation situation, i know this lower almost touch 15years low..)
Finally, i also considered to trade New Home Sales but not to trade if after the news the price only few pips, and consider risk aversion… then i was right..!!
But for my observation… i saw cable and fiber moved up after US bad home sales..and the reaction was right …what happen?
thanks for help..
Cheers
Stanley
As explained before, market has pushed JPY to a level that is its support. We may not see much strengthening unless something catastrophic happens. But in the case of EUR and GBP, a welcomed news to prompt a consolidation over recent losses.
Hello,
Why in this case you don’t short the jappy and not outer USD pair ??
Thanks
I thought I was the only one who had a terrible loss yesterday. I saw the USD/JPY go back to pre-news levels after 3 minutes. I also traded on the first retracement at the first minute as I was ecstatic as to see that we hit our trade trigger. The market apparently hit support but went back up. I thought it was another retracement so I kept on with the trade. But I realized I have seen the pattern before on non-tradeable news releases and I decided to close it with less than 10 minutes on the news. It was a good call apparently as I was able to cut my losses.
It was a different story on the EUR/USD pair, it kept climbing. With the next tradeable news focused on USD/JPY and since the pair has gone up to a new resistance level at 84.5, if we hit the trigger on the next news, can we expect this kind of retracement at yesterday’s support at 83.5? Thanks.
If you look at the recent activity in the market, especially for the USDJPY pair, you’d see that it is sitting on a support after a huge risk aversion push. I believe there isn’t much room for this pair to move down unless we get a much stronger release, such as the GDP on Friday. Unfortunately sometimes taking the context of the market into consideration is crucial to trading.
Henry,
Been following your trade plans with great success for over a month now. I really appreciate what you are doing!
Today though I had a loss trading the USD/JPY for this release. In retrospect (hindsight in forex is 20/20) I should have been watching and traded the EUR/USD instead.
To what would you attribute this failure to achieve momentum? No more sellers at this point for the pair, big player intervention, or immediate risk aversion to the release?
I look forward to your video if you post it to see how you as the master of your system traded this release.
Thanks,
Wes
Wes as said before in my previous answers, this is a case of fundamental outlook versus risk sentiment. Fundamental outlook is what we are trading based on the news, but risk sentiment is what is driving the market today.
Henry what do you mean by a risk sentiment day or a risk aversion day and how can you tell if the day was aversion or sentiment or even what the day will be?
thanks.
You can’t tell ahead what day it is going to be. However, you can identify it by using my currencystrengthmeter and if you see stronger JPY and USD while most other currencies are weaker, then you have a risk aversion day.
Hi Henry
Why on this news(actual worse than expect for USD) on USDCAD (not USDJPY) we have spike up(30 points in 2 min)?
Thanks!
Not sure, but on a worse US number means worse economic condition in the US, and USD being a safe haven currency, traders actually buy USD to be safe. This is confusing but just remember that when the market is in chaos, traders buy government bonds, and the most secure bond in the world is US Treasuries. So traders exchange to USD in order to buy US Treasuries for the safety. Thus strong USD.
Henry, I just shorted USDJPY and GBPJPY after the really bad housing figures, like you recommended…but it’s going the wrong direction for a whole hour. What’s going on?
GY dropped over 300 pips already… it just doesn’t have any more momentum to push lower. You have to look at the context of the market when trading…
As stated on the retail sales number for Canada, not a good day. This, too, met the deviation, but after the initial spike and retracement, never ended up going back down and passed pre-release price for a loss. Very, very, very frustrating day.
On a risk sentiment driven day, this sometimes happens. The best way is to always consider the context of the market before jumping in.
Henry,
Please give me a idea of where to open a forex account. Which brokers would you recommend? I will join you after noon EST.
Thanks,
Marty
Since I use IBFX for my own account, you can signup there if you want: http://www.ibfx.com