The struggling housing sector in the US continues to draw attention and is one of the keys to a recovery. The publication of New Home Sales will rock currencies, with USD/JPY being a good barometer for this event. Here are the details and 5 possible scenarios.
Published on Tuesday at 14:00 GMT.
Indicator background
The booming housing sector was a significant driver in the days before the financial crisis. Some of the money that fueled the building was sub prime mortgages, which triggered the fall later on.
After the crisis took its toll on this sector, a few government initiatives kept the real estate market afloat. But also here, after these programs were withdrawn, the market found it hard to walk on its own.
After a few strong months around a year ago, the figures returned to the lows of around 300K (annualized). Last month saw a small rise within this range – from 270K to 300K. It is now expected to tick up to 305K.
Why USD/JPT? The flood of news from Europe makes EUR/USD harder to trade on this event. Also most other currencies, seem to move from normal trading (where a weak US figure weakens the dollar) to a “risk trade” (where the dollar strengthens on weak US data) The Japanese yen is in the “safe haven” camp, alongside the dollar, and moves in a normal manner.
Sentiment and Levels
The recent weak GDP figure from Japan makes the sentiment slightly bullish on USD/JPY.
Technical levels, from top to bottom: 85.50, 84.50, 84, 83.40, 82.87, 82, 81.33, 80.44, 79.75, and 78.27.
5 Scenarios
- Within expectations: 295-315K: In this case, the market shakes and USD/JPY may rise, but it is unlikely to break technical levels.
- Above expectations: 315-330K: Dollar/yen rises, and has a good chance of breaking one resistance level.
- Well above expectations: 330K or more: Such good news can send the pair above resistance and possible for a challenge against another level.
- Below expectations: 275K-295K: Sliding to the lower part of the range will put pressure on USD/JPY, which might have a chance of breaking below support.
- Well below expectations: 275K or less: Depressing numbers increase the chances of breaking below support and settling at lower ground.
For more on this pair, see the USD/JPY forecast.
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