USD/JPY: Trading the Pending Home Sales Release

USD/JPY: Trading the Pending Home Sales Release

The U.S. Pending Home Sales Report is an important leading economic indicator, considered by analysts as a good measure of consumer demand in the housing sector. A higher reading than forecast points to a growing economy and is bullish for the dollar.

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

Published on Thursday at 14:00 GMT.

Indicator Background

The Pending Homes Sales Report provides analysts and investors with important information about the housing sector. As a house is likely to be the largest purchase that a consumer will make, this indicator gives is helpful  in determining consumer confidence and the health of the economy.

The September reading came in at a disappointing -1.2%, although this was higher than the market forecast of -1.7%. October’s forecast is for 0.2%, which would indicate some very modest growth in the housing sector.

Sentiments and levels

Economic indicators in Japan continue to point to a weak economy. Retail sales and consumer spending are down, and the economic outlook remains very uncertain.   The yen has met strong resistance, although the USD/JPY did recently reach an all-time high. Given the continuing European debt crisis, investors continue to view the yen and the dollar as safe haven currencies. So, the overall sentiment is neutral on USD/JPY towards this release.

Technical levels, from top to bottom: 78.50, 77.85, 77.50, 77, 76.25, 75.95, and 75.

5 Scenarios    

  1. Within expectations: -1.0% to 1%: In such a case, USD/JPY is likely to move within range, with a small chance of breaking higher.
  2. Above expectations: 1.1% to 2.5%: An unexpected reading into positive territory can send USD/JPY above one resistance level.
  3. Well above expectations: Above 2.5%: A sharp increase in housing sales could push the pair above a second resistance line or more.
  4. Below expectations: -2.5% to -1%: A reading lower than forecast could pull USD/JPY below one support level.
  5. Well below expectations: Below -2.5%: A sharp decline would signal deep concern about the US economy. In such an outcome, the pair would likely break two or more support levels.

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

Kenny Fisher

Kenny Fisher

Kenny Fisher - Senior Writer A native of Toronto, Canada, Kenneth worked for seven years in the marketing and trading departments at Bendix, a foreign exchange company in Toronto. Kenneth is also a lawyer, and has extensive experience as an editor and writer.