USD/JPY: Trading the US Existing Home Sales Oct 2012

The US Existing Home Sales indicator is released monthly, and provides analysts with a snapshot of the health and direction of the housing sector. A higher reading than the market prediction is bullish for the dollar.

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

Published on  Friday at 14:00 GMT.

Indicator Background

The Existing Homes Sales Report helps measure of the strength of the US housing market, one of the most important sectors  in the economy. As a house is likely to be the largest purchase that a consumer will make, home sales  are a critical component for economic growth.

Existing Home Sales have been climbing since July, and the September release of 4.82 million was well above the market estimate. However, the markets are expecting a downturn this month, with a forecast of 4.73M. Will the indicator surprise the markets and continue the upward trend in October?

Sentiments and levels

The BOJ has declared it will take steps to prevent the yen from becoming to strong, and there is also foreign acknowledgement about the need for a weaker yen.  This should translate into  more room for some gains. In addition, the improving situation in the US and Japan’s debt provide support on the downside. So, the overall sentiment is bullish on USD/JPY towards this release.

Another note: USD/JPY so far justifies its title as the most predictable currency pair for Q2.

Technical levels, from top to bottom: 80.60, 80.20, 79.60, 79.05, 78.80 and 78.

5 Scenarios

1. Within expectations: 4.68M to 4.78M: In such a case, USD/JPY is likely to rise within range, with a small chance of breaking higher.
2. Above expectations: 4.79M to 484M: An unexpected higher reading can send USD/JPY above one  resistance line.
3. Well above expectations: Above 4.84M: A sharp increase could propel the pair  above two or more resistance lines.
4. Below expectations: 4.62M to 4.67M: A weak reading could send USD/JPY below one support level.
5. Well below expectations: Below 4.62M. In this outcome, the pair could break two or more support levels.

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