New US Home Sale Levels Could Come In Higher Than Expected Today

As a quick note for this morning for all of you traders out there; make sure you are aware of the US new home sales report to be released at 10:00 AM EST. This is a very important report that is going to swing US dollar pairs depending on the number. If you remember from last month, existing home sales were up 5.5% for the month of September in the US. This was a surprise number that could indicate that consumers feel we are seeing the bottom of the housing market slump. With existing home sale increases could come an increase in new homes as well. Although credit has been frozen lately, that doesn’t make a difference for new or existing homes.

The previous number for new home sales in the US was 460K, with an expected decline this time to 452K. I feel that if this number comes out above 455K, then the US dollar pairs will immediately gain ground. I’m telling you this for two reasons:

1. Be very careful when trading or holding US pairs around 10 AM. Spreads could get crazy, and if you’re holding, your position could turn sour.

2. When you combine this with the weakness of the EUR/USD pair this morning, this could be a signal that this pair has a bit farther to fall and hasn’t reached any major price resistance levels yet.

The latest news from the European financial markets, especially smaller countries, has been awful at best. Many big bankers and forex traders are betting that the US will recover faster from the recent financial crisis, and therefore reiterate there bullish outlook on the US dollar for the short to midterm.

I was able to short the EUR/USD last night at the top of a downward channel in anticipation that resistance would not be broken and the German Ifo Business Climate report would be worse than expected. The level came in lower at 90.1, the lowest level since 2003. You can read more about this from the Cesifo Group report this morning. I am now sitting on a nice floating 65 pip gain that I will be watching carefully as to not let that trade turn negative. Cheers, and good luck around the news.

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