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The  Existing Home Sales indicator is released monthly, and provides analysts with important data about  consumer demand in 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 Wednesday 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.    As a house is likely to be the largest purchase that a consumer will make, this indicator  helps measure  consumer confidence  in the US economy.

The January reading for  the indicator was a weak 4.61M.  However, the figure was much better than the previous month, lending hope that the  housing sector will improve  in 2012. The market forecast for February calls for a slight improvement, to 4.65M.

Sentiments and levels

Economic indicators  point  to continued weakness in  the Japanese economy, notably, the first annual trade balance deficit in over 3o years.  Nevertheless,  given that the surging USD/JPY  is now  above the 78 level, there is room  for  consolidation. So, the overall sentiment has turned from bullish to neutral on USD/JPY towards this release.

Technical levels, from top to bottom: 81.50, 80.70,80.25, 80, 79.55,  78.30, 77.50 and  77.

5 Scenarios    

  1. Within expectations: 4.65M to 4.90M: In such a case, USD/JPY is likely to rise within range, with a small chance of breaking higher.
  2. Above expectations: 4.90M to 5.02M: An unexpected higher reading can send USD/JPY above one resistance level.
  3. Well above expectations: Above 5.02M: A sharp increase could propel the pair above a second resistance line.
  4. Below expectations: 4.52M to 4.64M: A reading lower than forecast could send USD/JPY below one support level.
  5. Well below expectations: In this outcome, the pair would likely  break two or more support levels.

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