US Pending Home Sales - Sell the Rumor Buy the News

A half an hour after the New York Cash Stock Equity Open at 10:00 EST (15:00 GMT) the Pending Home Sales figures were released. There were some negative headlines out of Europe about Greece and Portugal later in the European mid-day which gave the risk-on sentiment a pullback. The Emini S&P 500 sold off as the 9:30 open passed and headed down in the half hour leading into the News.

This really isn't the best economic news release to trade as everyone knows that housing is generally bad anyhow. In the past we have watched the USDJPY on US news but really the EMini S&P 500, the DOW or really any of the major Stock Indices generally follow US news quite well. The USDJPY does work but usually doesn't move many pips, perhaps 10. Here the figures:

US Pending Homes Sales MoM
Estimates- Median: -1.0% Average: -0.8% Range: -8.1% to +7.0%
Actual: -3.5% Prior: +7.3% No Revision
US Pending Homes Sales YoY
Actual: +4.4% Prior: +6.9% No Revision
US Home Price Index MoM
Estimates- Median: 0.0% Average: 0.0% Range: -0.5% to +0.5%
Actual: +1.0% Prior: -0.2% Revised: -0.7%

This is not large enough deviation trade, normally something closer to +/-5.0 or more, so this was a small -2.5 deviation and as the EMini had sold off into the news there was a good chance of a bounce back on a 'less worse than it could have been' type of rebound. Here is the 1 minute chart of the EMini S&P 500 from a spreadbet broker:

If you are stuck to just trading Forex, then the CADJPY is a good pair to trade because it has a good correlation to the main stock indices, which are driven by risk-on/risk-off price flow dynamic. Here is the 1 minute chart of the CADJPY forex pair:

US CPI, Housing Starts, Building Permits & Initial Jobless Claims - mixed reading forms a top

Today on Thursday January 19th at 8:30 EST (13:30 GMT) the Consumer Price Inflation figures were released from the USA. This also came out with a bunch of other data such as Housing Starts, Building Permits and the weekly Jobless data, the Initial Jobless Claims and Continuing Claims. So there was alot of data to go through was it was quite difficult to get a clear trade based on the numbers. The CPI was flat, the Housing Numbers were weaker but the Initial Jobless Claims made a new low, breaking December 2011 low which had just broken the late February 2011 low. Last week this number did rebound to 399k, a higher number being bad in this case, but then this week it came back down. This 'much better than xx months/ x years' type headline seemed to steal the limelight, everyone knows that Housing is bad anyhow, but if employment is better then the economy has a better chance of recovery. The morning had been pretty risk-on with good earnings reports from Morgan Stanley and Bank of American, both those stocks jumped over 6%. Here is the data:

US CPI Ex Food & Energy m/m
Estimates- Median: +0.1% Average: +0.1% Range: -0.1% to +0.2%
Actual: +0.1% Prior: +0.2% No Revision

US Headline CPI m/m
Estimates- Median: +0.1% Average: +0.1% Range: -0.1% to +0.3%
Actual: 0.0% Prior: 0.0% No Revision

US Core CPI y/y
Estimates- Median: +2.2% Average: +2.2% Range: +2.0% to +2.3%
Actual: +2.2% Prior: +2.2% No Revision

US Headline CPI y/y
Estimates- Median: +3.0% Average: +3.0% Range: +2.9% to +3.2%
Actual: +3.0% Prior: +3.4% No Revision

US Housing Starts
Estimates- Median: 680k Average: +682k Range: +625k to +723k
Actual: +657k Prior: +685k No Revision

US Housing Starts MOM%
Estimates- Median: -0.7% Average: -0.5% Range: -8.8% to +5.6%
Actual: -4.1% Prior: +9.3% Revised: +9.1%

US Building Permits
Estimates- Median: +679k Average: +680k Range: +640k to +728k
Actual: +679k Prior: +681k Revised: +680k

US Building Permits MOM%
Estimates- Median: -0.2% Average: 0.0% Range: -5.9% to +7.1%
Actual: -0.1% Prior: +5.7% Revised: +5.6%

US Initial Jobless Claims
Estimates- Median: +384k Average: +383k Range: +363k to +405k
Actual: +352k Prior: +399k Revised: +402k

US Continuing Claims
Estimates- Median: +3590k Average: +3577k Range: +3500k to +3630k
Actual: +3432k Prior: +3628k Revised: +3647k

So 1st chart is the EMini S&P 500 future 1 minute chart which basically show a whipsaw as the market digested the positive and negative aspects of the data:

Next is the USDJPY 1 minute chart which after a little whiggle did catch a bid, this one is the safest forex pair to trade on USA news but it doesn't always move that many pips:

finally is a 30 second chart of the CADJPY, this one usually follows the stock indices quite well and when good US data gives a boost to risk appetite this one can rally. However inflation is difficult these days. In the past high CPI meant that the Fed would more likely to raise interest rates which would strengthen a currency, however sometimes the stock market would not like higher rates. In the current economic situation however, high CPI means the Fed is less likely to do more Quantitative Easing and the market will rally if there is more QE but the US dollar will weaken.

US Housing Starts and Building Permits - higher leads to rally after some time

The Housing Starts and Building Permits data from the USA was released today December 20th 2012
at 8:30am EST, 13:30 GMT. It was higher and although the initial reaction was small it did lead to a rally in all risky assets...AUDUSD, CADJPY, DAX, EMini S&P 500 futures

The market is very thin, no volume due to the approaching Christmas holidays so the reaction might have been a bit exaggerated. However the number was alot higher than the median estimate, and hte largest deviation for awhile.

Here the figures:

US Housing Starts m/m
Estimates: Median 635k , Average 633k, Range 600k to 655k
Actual: 685k Prior: 628k Revised: 627k

US Housing Starts MoM%
Estimates: Median 1.1% , Average 0.8%, Range -4.5% to +4.3%
Actual: +9.3% Prior: -0.3% Revised: -2.9%

US Building Permits m/m
Estimates: Median: 635k , Average 636k, Range 610k to 668k
Actual: 681k Prior: 653k Revised: 644k

US Building Permits MoM%
Estimates: Median: -1.4%, Average -1.3%, Range -5.3% to +3.7%
Actual: +5.7% Prior: +10.9% Revised: +9.3%

Here some charts:
the CADJPY 5 second chart

and the USDJPY 10 second chart, not such a good response here:

the reaction in the EMini S&P 500 Future (this is spreadbet, probably slightly different the CME) 1 minute chart:

and finally a 1 minute chart of the DAX future:

US CPI + Housing Starts and Building Permits - momentum take some time to build

On Wednesday Nov.17th at 1:30pm GMT (8:30am EST) the Consumer Price Index for the USA was released. At the same time 2 housing data figures were also released. Although these housing numbers are important and frequently they are released on their own and we watch and trade these releases in the live forex & futures trading room when they do. This month however they just happened to be scheduled for the same date and time as the much more important CPI.

CPI is the main measure of inflation and US Federal Reserve has been myopically focused on the deflation that has been seen in the USA and this is 1 of their 2 main mandates - some have even mentioned making inflation the sole mandate of the Fed, currently the other mandate is for the Fed to support job growth. The deflation is the main reason that the Fed has introduced another round of Quantitative Easing, aptly named QE2. They have also maintained very low interest rates, all this is an attempt to make money more available, there is more of it. They use this created money to buy bonds.

Anyhow a higher than expected CPI is generally supportive the US Dollar, as if inflation comes back it may signal that QE2 is working and it is time to scale it back and think about raising rates. So far Australia, New Zealand, Norway, and even Canada have raised their rates after the financial crisis saw all Central Banks cut them drastically. When will the ECB and BOE follow, could the USA be the last to hike, or is it possible that a scenario like is seen in Japan where deflation has continued for over a decade and rates have remained next to zero for all this time. CPI has 4 numbers, 2 yearly and 2 monthly, 1 is a core number which excludes food and energy which are considered more volatile, and a headline number which includes food and energy. Anyhow here is the data:

(US) OCT CONSUMER PRICE INDEX M/M: 0.2% V 0.3%E; CPI EX FOOD&ENERGY M/M: 0.0% V 0.1%E; CPI NSA: 218.7 V 218.8E
- CPI Y/Y: 1.2% v 1.3%e
- CPI Ex-food & Energy Y/Y: 0.6% v 0.7%e (Core Y/Y CPI at 0.6% is lowest reading on record)
- CPI core index SA: 221.8 v 221.8 prior
- No revisisons

*(US) OCT HOUSING STARTS: 519K V 598KE (lowest since April 2009); BUILDING PERMITS: 550K V 568KE
- Prior Housing Starts revised lower from 610K to 588K
- The decline in overall starts was almost entirely due to a 44% plunge in multi-family starts. Single-family permits rose by 1.0% to 406K

- Note: Housing starts -11.7% m/m is approximately double the lowest street estimate.

So all the CPI figures were lower by -0.1, this was not enough of a difference lower for it to trigger the lighting fast entry generated by the Secret News Weapon from Fast Economic News Service, however the housing data was also lower. So looking at all the data as a whole after it was released, it all did seem rather negative for the US Greenback. Although the deviations for CPI were small but all 4 of the figures were all negative, which was a definate plus because some times they will conflict, where for example the Core month-on-month number is a positive deviation and the Headline year-on-year figure is negative. Then to add fuel to the fire the Housing Starts figure was the lowest reading since April 2009. As mentioned in previous posts, whenever we see a news headline where a number is the highest of lowest in a certain period of time, the market will pay attention to this. So this housing crisis, which started the how financial meltdown a few years ago, does not seem to be getting that much better, at least in the USA. The Building Permits Data was also lower, not by a large amount and it is not as important as the Housing Starts number, but as it also came out in the same negative direction all the other data, it did not matter and only supported the other data.

Ultimately in these situations price action is true indicator as to whether the data is good or bad. Normally in the trading room we focus on USDJPY when trading Spot Forex for US Data, as well as either the 10 year Notes or the EMini S&P 500 when looking at futures, but we have also started watching the USDCHF as it has had some really good moves on economic figures from the USA. Focusing on the moves in Spot Forex, initially the USDJPY and USDCHF only moved down 15-20 pips minute after the release. There was then a pullback as we have seen on many releases, to the 61% on USDJPY, but on USDCHF the 38% got frontrun. The USDJPY then moved about 10 pips from the number, while the USDCHF produced a 20 pip move, so definately outperforming the Dollar Yen on this news.

Also included are some charts of the next few hours after the release, as with US data sometimes we have to wait for the US Stock market to open, also sometimes there is more US Data at 3pm GMT (10am EST), and many market participants want to see all the data before making their trading decisions. There was no data except the DOE Crude Inventories at 3:30pm EST (10:30am EST), however with all the bad data there was really no reason not to stay short. If price action had turned back up then of course the decision to exit would have had to be take. The Swiss just went into a period of sidewise consolidation for the next half hour, before momentum gently turned lower and then accelerated. From the cart we can see several trading entry opportunities, drawing a new fib over the entire news reaction and watching the candlestick close for entry. Even after the initial move down price on the USDCHF came back up to test the news reaction low at 0.9925, producing another opportunity to enter if the trader had not yet got in or to add more to the position after banking some profit on the initial move down. The USDJPY made a key reversal also about half an hour after the news was also at the 61% fib of the news reaction swing which then price extended down even past the 161% extension of the same move.

UK Halifax House Prices Index initiates USD sell-off post FOMC

After the FOMC's announcement last nite to increase QE another 600 Billion, the major pairs (EURUSD, GBPUSD, AUDUSD) had retraced some of their gains. Prices had mostly consolidated below the FOMC spike high during the asian session and as Europe opened for trading price was near the lows of this mini-range, with EURUSD just above 1.41 and GBPUSD just above 1.61. The Halifax House Prices index for October had been on the schedule for tuesday, but it is one of these reports where the date and time of the release is not set in stone.

Having had a long day yesterday with so much news, this news really was not on the radar, and there is not much reliable past history to be totally sure about it. Regardless the number did come out higher and the pound responded instantly with a move of 20 pips in the first minute. Here are the numbers:

*(UK) OCT HALIFAX HOUSE PRICES M/M: 1.8% V 0.6%E; 3M/Y: 1.2% V 0.8%E
- Prior MoM revised lower from -3.6% to -3.7%

This release coincided with the London open and initiated a further USD sell-off against the majors, with EURUSD following the move up in GBPUSD in the next minute, and broke out of the consolidation range cut out during asia of 1.4105-1.4140. Prices shot up above the 1.42 handle without any decent pullback. However after consolidating above 1.42 for half an hour in the ProfitMongers Live Forex News Trading Room a trade was given to go long. Some 45 minutes later our target was hit near the big quarter penny at 1.4250 for 35 pips.