Index of pending sales in the real estate market. Impact of the news on the Euro/Dollar currency pair

The real estate market has always had a significant impact on the national currency exchange rate. Many traders ignore this data when conducting fundamental analysis on Forex.

Considering that real estate and the dollar exchange rate are completely distant matters, since such a small indicator for the US cannot in any way influence the world currency.

In fact, this is a big misconception, which can be argued with simple common sense.

Let's say you're an ordinary citizen and you want to buy an apartment, but due to a lack of money, you simply can't do it, just like the rest of our country.

In many ways, it's not even your fault; you can work hard for years and still not raise the money for your dream.

First of all, this speaks of the country’s weakness, its low wages and weak economy as a whole.

If a country's economy is developed, its citizens earn high wages and are able to afford such purchases. Therefore, by monitoring real estate data, traders and investors can always tell whether the economy is growing or declining.

The pending sales index is an economic indicator that characterizes the state of existing home sales, taking into account all pending contracts that have been signed but not yet paid. Simply put, it is a leading indicator that reveals the overall and potential near-term situation in the real estate market.

It's worth noting that the Pending Sales Index doesn't include new home and construction sales, but only the existing market. This indicator is released monthly and can have a significant impact on price movements, both at the time of release and for a long period thereafter. If the Pending Sales Index for the US housing market is higher than the previous one, it may indicate an improvement in the overall economic climate and the real estate market.

If the indicator is lower than the previous one, it indicates a weakening of the US economy and rising prices in the real estate market. This indicator can be tracked here: http://time-forex.com/kalendar

Using the Pending Sales Index in Forex Trading.

Now let's look at the practical application of this indicator in trading. You should understand that two weeks before the release of the Pending Sales Index, the US housing market also releases the completed sales figure, which already smooths out certain trends in this market, so don't expect a major price movement from this news.

It's also worth noting that news often comes out lower than expected, but higher than the previous value. Therefore, before opening a position, it's worth thinking three times about what this indicator tells us.

Let's look at the impact on the EUR/USD price over the past three months, the number of pips after the news release, and the overall price action.
The first example of a news release occurred on June 29, 2015. The INP indicator before the news was 2.7 percent, while traders expected 1.2 percent.

In fact, the IRR was 0.9 percent. Analyzing this indicator, we conclude that housing prices have risen, meaning the overall economic situation in the US has worsened. In practice, the EUR/USD currency pair should experience rapid growth. An example of the exit point and end of the news is shown in the image below:

Our conclusion proved more than correct, as the price quickly moved 110 points in our favor after the release of the indicator. It's worth noting that the news's impact lasted three and a half hours, and then, as is typical, it transitioned into a slow, sideways market.

The second example of the Pending Sales Index release dates back to July 29, 2015. Most traders predicted a PSI rise of 1 percent, but instead, they saw a -1.8 percent reading. As is typical, this signals weakness in the real estate market and a weakening US dollar, which should be reflected in a rise in the EUR/USD currency pair. You can see an example of the price action in the image below:

In this case, the price action was less predictable, but the news was effective. After the release of the indicator, the price moved against it by 20 pips, so most traders would have exited the situation and closed their positions.

However, the price gradually began to rise, and by the time the news ended, it had moved 50 pips in our favor. It's worth noting that the real impact of the news only occurred an hour after publication and lasted for four hours. Given that the news went against the main trend, the price immediately plummeted after its release, covering the entire pullback.

The third news release occurred on August 27, 2015. The value was lower than expected, at 0.5 percent, but higher than the previous figure of -1.7 percent. We conclude that the US economy is on the rise, which should be reflected in a decline in the EUR/USD currency pair. This reality can be seen in the image below:

The price successfully moved 65 points in 2 hours and 25 minutes, and after the news ended, the newly formed trend completely covered our profit.

Now, let's sum it up. If you were to trade this news and set a 50-point profit and a 50-point stop order, you would end up with 50+50+50=150 points of profit over three trades. It's also worth noting that the news's effect lasts for at least two hours, so don't rush to exit your position if it initially starts to go against you.