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USD/JPY: Trading the US New Home Sales Nov 2012

US New  Home Sales is released monthly, and provides analysts with important data  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 15:00 GMT.

Indicator Background

US New Home Sales  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  also  is used to  measure  US consumer spending and confidence.  

The  October release rose to  389 thousand, which was slightly above the estimate of 386K. The markets are not expecting a change  this month, with a  forecast of 387K. Will the  November reading  surprise with a stronger reading than expected?

Sentiments and levels

After another surge higher, the  USD/JPY could once again take a break for some consolidation.  The positive outcome  over the Greek debt talks has  already priced in. So, there isn’t much room to buy  EUR/USD on a deal, while there’s more room on the downside. So, the overall sentiment has turned from bullish to neutral on USD/JPY towards this release.

Technical levels, from top to bottom: 84.20, 83.34, 82.87, 81.80, 81.43 and 80.70.

5 Scenarios    

  1. Within expectations:  383K to 391K: In such a case, USD/JPY is likely to rise within range, with a small chance of breaking higher.
  2. Above expectations:  392K to 396K: An unexpected higher reading can send USD/JPY above one resistance level.
  3. Well above expectations: Above 396K: A sharp increase could propel the pair above a second resistance line.
  4. Below expectations:  376K to 382K: A reading lower than forecast could send USD/JPY below one support level.
  5. Well below expectations: Below 376K. In this outcome, the pair would likely  break two or more support levels.

For more on the 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.