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 exchange rate of the national currency. Many traders ignore such data when conducting fundamental analysis on Forex.

Considering that real estate and the dollar exchange rate are completely distant things, since such a small indicator for the United States cannot in any way affect the world currency.

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

Let’s say you are an ordinary citizen and you want to buy yourself an apartment, but due to lack of money, you simply cannot do this, like our entire 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 the weak economy as a whole.

If the state’s economy is developed, then its citizens receive high wages and are able to make such purchases. Therefore, by tracking real estate data, a trader and investor can always tell whether the economy is growing or declining.

The index of unfinished sales in the real estate market is an economic indicator that characterizes the state of sales in the secondary housing market, and all unfinished contracts that have been signed but not paid for this period are taken into account. Simply put, it is a leading indicator that shows the general and potential situation in the near future in the real estate market.

It is worth noting that the index of pending sales does not take into account sales of new houses and buildings, but only takes into account the secondary market. This indicator is released once a month and can have a significant impact on price movements, both at the time of release and for some long period after it. If the Index of pending sales in the US real estate market comes out higher than the previous one, this may tell us about an improvement in the overall climate of the economy and the real estate market.

If the indicator is lower than the previous one, this indicates a weakening of the US economy and an increase in 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 actually look at the practical point of using this indicator when trading. You should understand that two weeks before the release of the Pending Sales Index in the US real estate market, an indicator on completed sales is released, which already smoothes out a certain trend in this market, so you should not expect a large price movement from this news.

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

Let's look at the history of the last three months at the impact on the price of the Euro/Dollar pair, the number of points after the news was released and the overall price behavior.
The first example of news release took place on June 29, 2015. The IPI indicator before the news was 2.7 percent, and traders expected 1.2 percent.

In fact, the IPI was 0.9 percent. Having analyzed the indicator, we come to the conclusion that housing prices have increased, which means the overall economic condition of the United States has worsened. In practice, the Euro/dollar currency pair should grow rapidly. An example of the exit point and end of the news is shown in the picture below:

Our conclusion turned out to be more than correct, since the price after the release of the indicator rapidly moved 110 points in our direction. I would like to note that the effect of the news lasted three and a half hours, and then, as in the classics of the genre, it turned into a slow sideways market.

The second example of the release of the Pending Sales Index is dated July 29, 2015. Most traders predicted an increase in IPI to 1 percent, but instead, in fact, they received -1.8 percent. According to the classics of the genre, this tells us about the weakness of the real estate market and the weakening of the US dollar, which should be displayed as an increase in the chart of the euro/dollar currency pair. You can see an example of price behavior in the picture below:

In this case, the price behavior turned out to be less predictable, but the news worked itself out. After the indicator was released, the price went against it by 20 points, so most traders would have exited it by closing positions.

However, the price gradually began to rise, and by the time the news ended, it had moved 50 points in our direction. It is worth noting that the real effect of the news occurred only an hour after publication and lasted 4 hours. Considering that the news went against the main trend, after its end the price immediately rushed down, blocking the entire rollback.

The third example of news release occurred on August 27, 2015, and the value that came out was less than expected and amounted to 0.5 percent, but was higher than the previous one, which amounted to -1.7 percent. We conclude that the US economy has started to rise, which should be reflected in the form of a fall in the chart of the euro/dollar currency pair. The reality can be seen in the picture below:

The price successfully passed 65 points in 2 hours and 25 minutes, and after the end of the news, the newly formed trend completely blocked our profit.

And now let’s actually summarize. If you traded this news and placed a 50 pip profit and a 50 pip stop order, you would end up with 50+50+50=150 pips of profit in three trades. It is also worth noting that the effect of the news lasts at least two hours, so do not rush to leave the position if it initially begins to go against you.