Trading the US Durable's and New Home Sales

Hi Merlin, Re the Philly Fed, I wrote quite a bit on it on my fundies journal. I would watch for the Chicago PMI this Friday as the penultimate piece in the puzzle to tell us if the Philly may be a freak number.

Though I am not an economist, I bet a lot of economists are very simpathetic to USD. Just like I said, they quickly shove the number and said, "hey its not that bad"...

PS> I sure wish I am still in the trade to 1.8870...

BTW. Earlier, I already shorted GBPUSD at 1.8950 to 1.8900 on a "bullish USD sentiment trade" with a fractional lot. hoped it was a full lot though.

yeah i agree re chicago PMI.

after the philly fed came out i made a comment that it was a freak number. it was just so weak that it wasnt to be believed. it was the first negative number on philly fed in about 4 years or something like that.

I've looked at the data and established a very small short-term EUR/USD long at 1.2685 with a stop at 1.2680. Talk about tight! Prob get stopped out but I think the data deserves a temporarily higher EUR.

from E/U, Long @ 1.2696 before the spike, and gained 16 Pips. Retrace with cable, Short @ 1.8922 gaining 30 pips. both position using buy/sell stop.

Bullish for who...????

BTW... I got short GBP/USD @1.9030 TS/L manual @ 1.8944 but DAMN!!! got stoped out because I change the trailing stop to 1.8927!!!! just 5 minutes before the Good Order release... +103... aiming around 1.8867 again but failed
Oh... well at least it's a profit... I guess I can call it a day

Despite the big surprise in the DGO data, this is volatile and more importantly it is backward looking (its August data), which explains why bonds and fx nearly always retrace after the release. I do think the extent of the weakness in the report is a little worrying but there are more important indicators to watch.

PS - On my 'fade-the-fade' trade I took profit at 1.2693. Only +7 pips.

Whats the radar on New Home Sales?

The reaction to NHS is very similar to Existing Home Sales:
1) Fade if the 1st minute spike is strong
2) follow the trend if the 1st 2 minutes is slow...

But I bet we'll experience a heavy mover later.

It's all very nice to see everyone posting good trades in here, but where can I find the next release for the next news item (US new home saleS)?

And... will the movement be in minutes just as the one previous or should I wait a little before acting on the news?

Reuters consensus estimate for New Home Sales is 1.040 (75 analysts polled).

The range is generally between 1.00 and 1.06. Anything outside of this range could generate a pretty large response in the markets given focus on the residential housing market. (Two small player analysts are going for just under 1.00).

- In conjuction to BK's comments here is my 2 pence worth: With the pound trading on the weakside all day today, it may be more interesting to take long USD positions against GBP vs the EUR, as you may get more bang for your buck both in terms of pips and GBP downside. This would apply if you are taking a position before the data, straddling, or fading.)

The ForexFactory (I'm guessing Bloomberg) forecast is -2.5%.

NEW YORK, Sept 25 (Reuters) - Sales of new homes in the United States likely slid about 3.0 percent in August, boosting the supply of unsold homes as the U.S. housing sector retreats from its record five-year run, according to economists surveyed by Reuters.
New home sales dropped to a 1.040 million unit annualized rate last month, according to the median forecast from a Reuters poll of 75 economists.

In July, sales fell 4.3 percent, to a 1.072 million rate, while the supply of unsold homes climbed to its highest in more than a decade.

The pace of the housing sector's correction and its likely impact on consumer spending are being scrutinized by a market highly concerned with the U.S. economy's growth prospects and the Federal Reserve's future policy on interest rates.

Fed policy may swing with the fortunes of the housing market, and Wall Street economists appear divided as to how much further housing will deteriorate.

...The following is a sample of economists' views on new home sales in August:



CITIGROUP, ECONOMICS TEAM, NEW YORK:

FORECAST: 1.05 MILLION

"The reported deterioration in home builders' appraisals of sales in early August, along with a further decline in prospective buyer traffic, implies that new home purchases probably fell to a six-month low. While all areas of the country likely witnessed reduced activity during the reference period, a sharp reversal of sales in the West probably accounted for almost two-thirds of the forecast decline. In contrast to sales, the number of new homes on the market likely climbed to a record 575,000 in August, pushing the stock of unsold dwellings to 6.3 months' supply."



LEHMAN BROTHERS, ECONOMICS TEAM, NEW YORK:

FORECAST: 1.050 MILLION

"The July new home sales report suggested a faster slowdown in the housing market with a 4.3 percent decline in sales and record high inventories. We expect new home sales to continue to decline in August, falling 2 percent to a 1.05 million annualized rate. Leading indicators of new home sales point to a decline in sales. Most notably, housing starts have declined sharply, with August starts falling 6 percent, month-on-month or nearly 20 percent year-on-year. In addition, home builder sentiment has fallen rapidly: the National Association of Home Builders sentiment index fell to 33 in August, the lowest in over a decade."



BARCLAYS CAPITAL, ECONOMICS TEAM, NEW YORK

FORECAST: 1.050 MILLION

"New home sales are expected to fall to 1050k in August from 1072k in July. Declining mortgage applications and deteriorating home builder sentiment suggest that sales likely continued their downward trend last month."



STONE & MCCARTHY RESEARCH ASSOCIATES, YOUNG KIM, PRINCETON, NEW JERSEY:

FORECAST: 1.062 MILLION

"We look for a more modest decline in new home sales in August after falling 4.3 percent in July. Against strong comparisons from last year, these numbers look even worse. Compared to August 2005, sales will be down 16.4 percent.

"Sales topped out at 1.367 mln in July 2005, and sales have been down in the seven months since then. The August drop would put the level of new home sales at their lowest pace since February 2006. Excluding that quirky month, which appeared to have been weather related, sales would be the lowest since April 2003 (1.012 mln).

"There is a direct relationship between new home sales and building permits, and the relationship with the MBA's purchase application index is even better. The purchase application index fell to 383.9 in August from 396.4 in July."

--

Me - There is a very large divergence in views on where bond yields will be going forward, which in large part a reflects differning views on the course of the housing market. I think a significant surprise number in either direction could produce a sustained move in the USD as one end of housing mkt opinion spectrum may have to re-evaluate its views. This isn't exactly ground breaking eh!

Took one lot at ++12 and have two lots set at breakeven with a trail.

Just watched the market...slow move precipitated an entry short.

DC

The US New Home Sales is better-than-expected. Today's trend is clearly Bearish for GBP/USD... Hurry up and caught up with the trend guys...Have a nice trading...

I have the same LONG USD sentiment for the day. Call it SYMPATHY. I personally feel that USD had been in the downs far too long and traders are taking a bullish stance towards it.

Seeing that New Home Sales is not a "fast" 1st minute mover (and compounded with IBFX's freeze), I decided to enter after the frenzy again (using NorthFinance).

As I posted earlier, if the 1st mintue spike is big, fade it.Well, it faded in the 2nd minute and I could not enter fast enough... So I waited for it to totally retrace and went SHORT for 19 pips..

I like the dollar sentiment today too but I have significant technical resistance in this area on the Franc, Yen & Pound dollar crosses. I will be watching for signs of a reverse. However, If we take out the highs/lows form the housing data spike, it is more dollar time for me.

Well done BK.
Nice analysis regarding the market behaviour on Durable goods release. And all well before it happened. You seem to have a good eye for these things. Keep up the good work. Thanks.

New Home Sales. SHould have canceled my trade since the numbers came as expected, close to it at least.

Straddled and lost about 4 pips.

Traded retrace, exited and made 10 pips.

The freakin commissions is killin me!!! 40 bux total for commissions today, they are makin a killin off of me!

-4= news (automated TTO exited me on the trade, i should have kept it, since i caught the spike down).

+10= Fade, slow slow fade.

Dollar seems bullish now, but will the two Fed speeches today have any effect on this trend? What can we expect to be said, and how should we trade against them? I'm certain there's no "fade" method here...

...right?

Oh btw, I made 13 pips on the news,

but the spike was too soon for me to fade... only made 2 pips on the fade.

15 pips on the item.

Good I guess?

Played out as expected. EUR/USD has retraced, but cable is a lot lower. Not a good day for the pound today. I did okay, but BK has mastered the game.

(PS - Being a mild USD bull, 'fading the fade' on EUR/USD could be profitable through the rest of the day)