Chapter 6 – Fundamental News 101 (Part I)

Last but not least…

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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.

Existing Home Sales – 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.
These two indicators, along with Housing Start, Building Permit, and Housing Prices, measure the health of the housing sector. I only trade these two housing news releases because they have the best track records with most predictable market reaction after the news release.

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Another notable news release only for the U.S. is:

Durable Goods – or a hard good is a good which does not quickly wear out, or more specifically, it yields services or utility over time rather than being completely used up when used once. Durable goods measures primarily goods with a shelf-life of more than 3 years, such as household appliances.

This indicator is usually related to Home Sales. If we get higher housing figures, most likely we will get higher durable goods releases as well.

HIGHER
HOUSING
= HIGHER
GDP
= HIGHER CURRENCY VALUE
         
   

OR

   
         
LOWER
HOUSING
= LOWER
GDP
= LOWER CURRENCY VALUE

 

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About Kelvin Ching

I'm a professional Forex trader and I have been trading for over 7 years. I was a series 3 broker and a registered CTA with the NFA, the main regulatory agency in the United States, and I have been involved at the highest levels in commodity trading. I also have a background in Information Technology, graphics design, and programming... I'm the co-founder of CurrencyNewsTrading.com, a site dedicated to fundamental analysis and news trading.

Comments

  1. uwah prince ozioma says:

    will love to get more understanding on what mr wayne is saying, that’s exactly my question.thanks

  2. mr wayne says:

    if we have a better economy, we will have a higher inflation, a higher interest rate will follow, and higher currency value will be perceived.

    I dont understand this part , don’t we have bad economy is we got high inflation ??

    Also , if there is high inflation , meaning the value of the money in that country is depreciating , in order to bring the balance back , why would the interest rate be increase ? If interest rate increased means is more expensive to borrow money from the bank .

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