EUR/USD: Trading the US Pending Home Sales Release

US Pending Home Sales always rock the markets, especially when the change is large, like last time. The upcoming release provides a trading opportunity. Here are the details, and 5 possible outcomes for EUR/USD.

Published on Wednesday, June 29th, at 14:00 GMT.

Indicator Background

The process of home transactions is long. It takes time between the signing of the contract until the final transaction. The number of homes in this status reflects current activity in the housing sector. A rise in this figure means more economic activity, while a drop means less.

In the recent press conference, Ben Bernanke stated that foreclosed homes are pressuring the housing sector down, while regular transactions are OK. A free up of America’s many foreclosed homes will push the economy forward.

Last month was terrible: the number of pending homes dropped by 11.6%. This double-digit fall was totally unexpected and shows that the housing sector is still struggling. This followed other weak figures in May.

This time, a correction is expected, but economists are cautious. A rise of only 1.3% is predicted. This leaves room for an upwards surprise, a correction of the big fall last month.

Sentiment and levels

The current sentiment on EUR/USD is bearish, due to the Greek debt crisis. The timing of the release is now well before the final vote in the Greek parliament on the austerity measures. So, trading this event at this time will be less distorted by external factors.

Technical levels from top to bottom: 1.4450, 1.4375, 1.4282, 1.4220, 1.4160, 1.4120, 1.4030, 1.3950 and 1.3860.

5 Scenarios

1. Within expectations: +0.5% to +2.5% – in this case EUR/USD will shake, and is likely to slide lower within the current range.
2. Above expectations: +2.6% to 5% – an upside surprise is a reasonable outcome given the big fall last time. In such a case, the pair is likely to fall, with a good chance of breaking below one support level.
3. Well above expectations: Above 5%. This option cannot be ruled out. In such a case, a break below two support levels is also possible. One level seems very likely.
4. Below expectations: -0.5% to +0.5%: With current US weakness, a mild disappointment is certainly possible. EUR/USD can rise, with some chance of breaking higher.
5. Well below expectations: Below -0.5%. While this option seems unlikely, this will hurt the dollar. A rise above resistance will have excellent chances.

For more about the pair, see the Euro to dollar forecast.