Trade Desk Thoughts - New Home Sales

New Home Sales (July) Actual 515k, Expected 530K, Previous 503k (Revised down from 530k)

Release Explanation: Released by the Census Bureau, the report covers the change in the number of new home sales in the month reported on an annualized basis This report is important since the housing market is included in most economic forecasts and because the present economic problems are due in part to the decline in housing prices since 2006. Retail Sales, CPI, and PCE in the US. A happy householder will usually lead to a strong economic outlook. A miss here, either way, and the Markets gets to see the real confidence of the US consumer. There is a very strong impact on the sentiment towards the US Dollar from this report.

Trade Desk Thoughts: There was a 2.4% increase in the number of new homes sold during July as the supply declined 5.2%, the most since November 1963, to 416,000. The median price of a new home decreased 6.3% to $230,700, from $246,200 a year earlier. Also reported was the Conference Board's index of Consumer Confidence for August, which showed a gain to 56.9 after a decline in gasoline prices.

"It's a bit difficult to believe that confidence will improve further if the job market continues to weaken," said Matthew Carniol, chief currency strategist at TheLFB-forex.com. "As with yesterday's report on existing home sales, the data indicates that lower prices are beginning to attract buyers. Nonetheless, currency valuations are being driven to a large degree by commodities, especially oil, along with U.S. stock markets. Oil declined during trading in Europe and the dollar advanced but oil prices have since gone up as traders speculate Hurricane Gustav may disrupt supplies from the Gulf of Mexico. We can expect to see oil prices come right back down again if the storm passes without causing damage, especially since demand is projected to slow further as the economy cools in the second half of the year."

Forex technical Reaction: After gaining strongly during the overnight session, the dollar began retreating as oil gained after reports indicated Hurricane Gustav may enter the Gulf of Mexico. Oil was recently trading near $117 per barrel (1.66%) after trading down to nearly $113 per barrel during the overnight trading session. S&P furures remained in positive territory after release of the S&P/CS HPI, which showed the rate of monthy home price decline may be slowing.

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