U.S. New Home Sales is a leading economic indicator used to measure the annual number of new single-family homes that were sold during the previous month. While this is a monthly figure, it is reported in an annualized format. This report predominantly helps to validate trends seen in other forward-looking housing indicators, such as the Existing Home Sales.

If the Survey Comes Inline with Market Forecasts

Expectations for this month are suggesting that the U.S. New Home Sales will reach 510K in August, reflecting a 5K decrease since July. Such a result could demonstrate a shrinking housing sector in the U.S., which has been one of the U.S. economy’s greatest concerns. It is widely known that this crisis was initiated as a result of the non-covered mortgages that dropped mortgage banks one by one, and have just recently taken the 160-year-old Lehman Brothers bank to the point of filing for bankruptcy protection. A decreasing figure will most likely be interpreted by investors as yet more proof that the American people are avoiding buying new homes, and that the mortgage banks are reluctant to offer mortgages as freely as they used to. Such a scenario will probably extend the greenback’s bearish movement, and the EUR/USD might rise to test the 1.4800 level.

If the Survey Will Surprise With Bullishness

When the actual figure is higher than forecasted, traders are likely to see the USD appreciate against its currency pairs and crosses. The radical trading week we have just experienced, which included an extremely volatile trading session, concluded with significant weakness for the USD. Investors are now following the opportunity to make profits out of their open positions on the USD, and a better-than-expected figure on the New Home Sales survey, such as 540K will possibly provide them that exact opportunity. Such a figure is good because it will ease global market concerns regarding an expanding mortgage crisis. U.S. citizens feeling confident enough to purchase new homes is the best news that the American leadership can hope for, and the USD will rise in accordance. In this turn of events, the EUR/USD might correct itself down to reach as low as the 1.4400 level.

This entry was posted on Wednesday, September 24th, 2008 at 1:47 pm and is filed under Weekly market comments. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.