Housing data is one of the most important components of projecting currency moves and in anticipating a change in the interest rate policies. Interest rate changes affect the currency pairs drastically. Rather, whatever market you trade, interest rate plays a pivotal role in all financial markets. Interest rate increase always appreciates a currency while an interest rate decrease causes depreciation.

As a forex trader, you should anticipate these interest rate changes. The best way to anticipate interest rate changes is by watching the housing sector. Now, housing sector is a reliable indicator in almost every country that has a floating currency.

A weak housing market portends a decrease in the interest rate by the Central Bank while a strong housing market raises fears of inflation and a likely increase in the interest rate. As a currency trader, you need to keep an eye on the key sources of housing data and develop a focus on key indicators for each currency pair.

For forming your market sentiment about US Dollar, you can keep watch on housing equities. Housing equities can give you an important clue about the prevailing trend in the US housing sector. Now KB Homes is a leading indicator of single family homes in US. KB Homes stock price can be taken as a leading indicator of the strength or weakness of the US housing market.

Suppose, you trade GBPUSD pair! In July 2006, an uptrend in GBPUSD pair started that lasted for many months. The currency movement went to historical highs against the US Dollar (USD) and then retraced back at the end of 2007.

The cause was the fall in housing prices after a decade long boom. The direction of GBPUSD pair followed a significant slowdown in housing prices and mortgage approvals in Britain. Now you can use housing data in trading Australian Dollar (AUD) as well. This statement by Bloomberg can give you an indication that how important housing sector can be for AUD: “AUD rose, reversing a loss, after a government report showed home building approvals unexpectedly surged in November by the most in the nine months.

Similarly, if you trade Japanese Yen (JPY), you will find the Japanese housing data as an important factor in forming expectations about the Japanese economy. Similarly no matter what currency pair you trade whether it is New Zealand Dollar (NZD) or Canadian Dollar (CAD), housing start data is leading indicator of whether the economy is declining, stalling or growing.