USD/JPY: Trading the Existing Home Sales Indicator

The Existing Home Sales Report is an important economic indicator, and is utilized by analysts to measure consumer demand in the housing sector. As a house is likely to be the largest purchase that a consumer will make, this indicator provides data about the mood of consumers and the health of the economy. A higher reading than the market prediction points to a improving economy and is bullish for the dollar.

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

 Published on Monday at 15:00 GMT.

 Indicator Background

 The Existing Homes Sales Report provides analysts and investors with a snapshot of the strength of the US housing market, one of the most important sectors of the economy. A higher reading than the market prediction points to an improving economy and is bullish for the dollar.
October’s reading for Existing Homes Sales was down from September, coming in at a disappointing 4.91M. This figure was close to the market forecast, which was 4.94M. The forecast for November is a further decrease to 4.82M, which would mark the third consecutive drop of the indicator. This would undoubtedly worry traders and investors, and have a negative effect on the dollar. Will the indicator buck the downtrend and rebound upwards?

Sentiments and levels

Economic indicators in Japan point to some modest growth in the economy in the third quarter. However, the outlook for industrial production is uncertain, due to continued turmoil in the global markets and the strong yen. So, the overall sentiment has turned from bearish to 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 75.57.

5 Scenarios    

1. Within expectations: 4.70M to 4.95M: In such a case, USD/JPY is likely to rise within range, with a small chance of breaking higher.
2. Above expectations: 4.95M to 5.07M: An unexpected higher reading can send USD/JPY above one resistance level.
3. Well above expectations: Above 5.07M: A sharp increase could propel the pair above a second resistance line.
4. Below expectations: 4.57M to 4.69M: A reading lower than forecast could send USD/JPY below one support level.
5. Well below expectations: Below 4.57M: Due to the weak US economy, a sharp decline cannot be ruled out. In this outcome, the pair would likely drop two or more support levels.

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