EUR/USD: Trading the US Pending Home Sales Release

The Pending Home Sales Index is a leading indicator of housing activity. The index is released in the first week of each month, and provides analysts with an early glimpse of consumer demand and confidence. A higher reading than that forecast is good for the dollar.

Here are all the details, and 5 possible outcomes for EUR/USD.

Published on Thursday at 14:00 GMT.

Indicator Background

The Existing Homes Sales Report is a key leading indicator of the all-important housing market, and as such may signal in which direction the economy is headed.

The previous reading came in at a disappointing -1.3%, the third straight reading in negative territory and below the market forecast. Will the downward spiral continue? September’s forecast is for -1.6%. Anything lower could indicate that the housing sector, and indeed the overall US economy, is in deep trouble.

Sentiments and levels

The Federal Reserve’s “Operation Twist” led to a rally by the greenback against the Euro and other currencies. The news in the Euro-Zone is worrying. The Greek debt crisis, which shows no sign of being resolved soon, is weighing heavily on the Euro, and unemployment is hovering at 10%. So, the overall sentiment is bearish on EUR/USD towards this release.

Technical levels, from top to bottom: 1.3950, 1.3838, 1.3750, 1.37, 1.3630, 1.3550 and 1.35.

5 Scenarios    

1. Within expectations: -4.0% to 1%: In such a case, EUR/USD is likely to move within range, with a small chance of breaking higher.
2. Above expectations: 1.1% to 4.0%: An unexpected reading into positive territory can send EUR/USD below one support level.
3. Well above expectations: Above 4%: A sharp increase in housing sales could push the pair below a second support line or more.
4. Below expectations: -6.8% to -4.1%: A reading lower than forecast could send EUR/USD above one resistance level.
5. Well below expectations: Below -6.9%: A sharp decline would signal deep concern about the US economy. In such an outcome, the pair would likely break two or more resistance levels.

For more on the Euro, see the EUR/USD forecast.