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New Home Sales Up, Safe-Havens Rally

Posted Friday, July 24, 2020 by
Shain Vernier • 2 min read

Safe-havens are quickly turning into the main financial story of summer 2020. Steep July rallies in GOLD and the Swiss franc have been the key highlights. However, the Japanese yen has made a big move vs the Greenback today, gaining more than 1%. For the time being, forex traders are ignoring this morning’s strong U.S. New Homes Sales (June) report.

It has been an active Friday on the economic calendar. Here’s a quick look at the hard data:

Event                                                                   Actual               Projected        Previous

New Home Sales (MoM, June)                         0.776M                0.700M           0.682M

New Home Sales Change (MoM, June)            13.8%                    4.0%               19.4%

Baker-Hughes U.S. Rig Count                              181                        NA                  180

Perhaps the biggest eyebrow-raiser of this group is the uptick in the U.S. rig count. For the first time since March 13, the Baker-Hughes Rig Count has posted a gain. So, is this the end of the U.S. shale downturn? Not likely, but we may be finding a bottom.

For the second straight month, New Home Sales have grown by double-digits. At this point, it looks like mortgage lenders and borrowers are enjoying ultra-low interest rates and the availability of funds. I expect this figure to hold well above 10% for July.

New Home Sales Remain Strong, Safe-Havens Spike

The USD/CHF is poised to close in the red for the seventh-consecutive week. This has been quite the bearish run, with rates falling more than 350 pips. As we roll toward August trade, it looks like a test of the COVID-19 panic low is imminent.

new home sales
USD/CHF, Weekly Chart

Going into next week, there is one level on my radar for the Swissy:

  • Support(1): COVID-19 Panic Low, 0.9183

Bottom Line: Unless the FED decides to get hawkish in a hurry, the USD/CHF will very likely continue to fall. If nothing else, today’s strong New Home Sales figures make the case for positive consumer sentiment. But, if the Swissy continues its descent, a buying opportunity from the COVID-19 panic low may come to pass.

Until elected, I’ll have buy orders queued up from 0.9187. With an initial stop loss at 0.9169, this trade produces 25 pips on a better-than-1:1 risk vs reward ratio.

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