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US Pending Home Sales is an important leading economic indicator, considered by analysts as a good measure of the health and direction of the housing sector. As a key indicator, this release can affect the movement of GBP/USD. A higher reading than forecast is bullish for the dollar.

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

 Published on Wednesday at 14:00 GMT.

 Indicator Background

 Pending Homes Sales provides analysts and investors with important information about  activity in  housing sector. As a home is likely to be the largest purchase that a consumer will make, this indicator gives is important in determining consumer confidence and spending, which are critical to the health of the economy.

The  April  reading sparkled, as the indicator jumped 4.1%. This was well above the market estimate of 1.2%, and the indicator’s   best performance in 2012. The markets are expecting a much weaker release in May however, with a forecast of a flat 0.0%.

Sentiments and levels

After a splendid 2012, the pound has taken a beating from the US dollar in May. How much further can it drop? The recession in Europe and crisis in Greece are sending nervous investors to safe haven currencies such as the dollar, and the greenback is taking full advantage. As well, the UK economy continues to sputter, as seen in indicators such as last week’s sharp drop in Retail Sales, a key indicator. So, the overall sentiment is  bearish on  GBP/USD towards this release.

Technical levels, from top to bottom:  1.5930, 1.5805, 1.5750, 1.5648, 1.5603 and 1.55.  

5 Scenarios    

  1. Within expectations: -0.4% to 0.4%: In such a case, the /GBPUSD is likely to move within range, with a small chance of breaking higher.
  2. Above expectations: 0.5% to 0.9%: An unexpected stronger reading can send  the below one support level.
  3. Well above expectations: Above 0.9%: A sharp increase in housing sales could push  GBP/USD below a second support line.
  4. Below expectations: -0.9% to -0.5%: A reading lower than forecast could send the  pair above one resistance level.
  5. Well below expectations: Below -0.9%: A sharp decline would  raise concerns  about the health of the US economy. In such an outcome,  GBP/USD could break two levels.

For more on the pound, see the GBP/USD forecast.