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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 Wednesday 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 dropped to 4.92 million in April, below the estimate of 5.02 million. The key indicator has now fallen below expectations for the past two readings. The estimate for the May release stands at 4.99 million. Will the indicator surprise the markets and beat the prediction?

Sentiments and levels

The long term direction of USD/JPY remains upwards: the  aggressive monetary and fiscal policies coming out of Japan are likely to push the yen lower across the board. In the US, the fiscal tightening and the hints about unwinding QE as soon as this summer can boost the dollar across the board.

However, forex trading is usually not a one way street. After the big moves by the dollar in the past two weeks, which saw the yen drop below the 100 mark, we could see some consolidation, at least a temporary one. It is impossible to call a top or a bottom, but perhaps we will get a pause in the action. So, the overall sentiment is  neutral 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: 104.60, 103.50, 102.80, 101.80, 101.44 and 100.

 

5 Scenarios

  1. Within expectations:  4.93M to 5.05M: In such a case, USD/JPY is likely to rise within range, with a small chance of breaking higher.
  2. Above expectations: 5.06M to 5.09M: An unexpected higher reading can send USD/JPY above one  resistance line.
  3. Well above  expectations: Above 5.09M: A sharp increase could propel the pair  above two or more resistance lines.
  4. Below expectations:  4.89M to 4.92M: A weak reading could send USD/JPY below one support level.
  5. Well below  expectations: Below 4.89M. In this outcome, the pair could break  two or more support levels.

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

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