USD/JPY: Trading the Existing Home Sales Release

 The Existing Home Sales Report is an important economic indicator, considered by analysts as a good measure of consumer demand in the housing sector. As a house is likely to be the largest purchase that a consumer will make, this indicator provides critical data about the mood of consumers and the health of the economy. A higher reading than the previous month points to a growing economy and may help the dollar rise.

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

Published on Wednesday at 5:00 GMT.

Indicator Background

The Existing Homes Sales Report is a key leading indicator, and together with housing starts, provides an accurate snapshot of the strength of the US housing market. A higher reading than the previous month points to a growing economy and may push the dollar upwards.

Like many other US economic indicators, the Report has shown a steady downward trend over the last six months. The August reading came in at 4.67M, which was significantly lower than the forecast of 4.91M. The forecast for September is for a slight rebound of 4.76M, and could be the start of an overdue recovery in the residential housing market.

Sentiments and levels

Economic signals in Japan remain mixed, so trying to predict the direction of the economy could prove to be a frustrating guessing game. At the same time, there is a good chance that the BOJ will intervene, resulting in the USD/JPY moving higher. So, the overall sentiment is bullish on USD/JPY towards this release.

Technical levels, from top to bottom: 78.20, 77.85, 77, 76.25, 75.95, and 75.

 5 Scenarios

1. Within expectations: 4.60M to 4.90M: In such a case, the USD/JPY is likely to rise within range, with a small chance of breaking higher.
2. Above expectations: 4.91M to 5.05M: An unexpected higher reading can send USD/JPY above one resistance level.
3. Well above expectations: Above 5.05M: A sharp increase could propel the pair above a second resistance line.
4. Below expectations: 4.45M to 4.59M: A reading lower than forecast could send the USD/JPY below one support level.
5. Well below expectations: Below 4.45M: Due to the weakness of the US economy, a sharp decline cannot be ruled out. In this outcome, the pair would likely break two or more support levels.

For more on USD/JPY, see the USD/JPY forecast.