Demands for existing homes in the U.S. are expected to rise for the second consecutive month in January as potential home buyers take advantage of the record drop in home prices however, as household face a weakening labor market paired with fears of a deepening recession, the outlook for the housing sector remains bleak. Trading The News: U.S. Existing Home Sales What’s Expected Time of release: 02/24/2009 15:00 GMT, 10:00 EST Primary Pair Impact : EURUSD Expected: 1.3% Previous: 6.5% Effects of Existing Home Sales on EURUSD for the past 2 months Period Data Releases Estimate Actual Pips Change (1 Hour post event) Pips Change (End of Day post event) Dec-08 01/26/2009 15:00GMT -2.00% 6.50% -8 48 Nov-08 12/23/2008 15:00GMT -1.00% -8.60% -36 -51 December 2008 U.S. Existing Home Sales Existing home sales in the U.S. unexpectedly increased in December after dropping at a record pace in the previous month as falling home prices spurred demands among potential buyers. Home purchases rose 6.5% during the month to an annual pace of 4.74M from 4.45M in November as prices dropped 15% from the previous year, which was the biggest decline since recordkeeping began in 1968. A deeper look at the report showed that sales of single-family homes rose 7.0% after falling 8.9% in November, while purchases of multi-family homes increased 2.1% after dropping 13.0% in the previous month. Despite the rebound in home sales, the data continues to reflect dour outlook for the housing market as home prices continue to fall lower, and as credit conditions remain far from normal, housing conditions are likely to deteriorate further this year. November 2008 U.S. Existing Home Sales The outlook for the U.S. housing market weakened further as existing home sales fell at a record pace in November. Purchases of homes fell 8.6% after dropping 3.1% in October, and conditions are likely to get worse as prices continue to fall further. The breakdown of the report showed home prices slipped another 13% during the month, while demands for homes weakened throughout the country. Mounting growth concerns paired with the downturn in the labor market lead the FOMC to lower the benchmark interest rate to a range of zero to 0.25%, and went onto say that the central bank may increase its purchases of debt from Fannie and Freddie in an effort to reduce mortgage costs for home owners. Despite the extraordinary efforts taken on by the Fed and the U.S. Treasury, the downturn in the housing sector is likely to carry through into the next year as credit conditions remain far from normal. What To Look For Before The Release Traders with access to market depth information via the FXCM Active Trader Platform may use it to gauge the potency of the economic data release as well as to shed some light on the market’s directional bias. Increasing volume ahead of the announcement will telegraph likely follow-through behind whatever move is to materialize, while an imbalance in available liquidity on the Bid versus the Offer side of the market will tell us the direction major institutions are likely favoring ahead of the announcement: Bullish Scenario: If we see substantially deeper available liquidity on the Bid side of the market, this tells us that major price providers in the market are looking to buy the Euro against the US Dollar. Considering that close to 60% of all FX market volume is cleared through just six top banks, we see it prudent to be on the same side of the trade as major institutions and will favor a bullish bias on EURUSD ahead of the data release.

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