USD/JPY: Trading US Pending Home Sales

US Pending Home Sales is a leading indicator of the level of activity in the important housing sector. An unexpected reading in this key  release may affect the direction of USD/JPY. As well, a  reading which is higher than that forecast is bullish  for the dollar.

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

Published on Thursday at 14:00 GMT.

Indicator Background

The US Pending Home Sales Report  provides analysts with important information  regarding the health of  the  housing industry.  As a house is likely to be the largest purchase that a consumer will make, the indicator provides critical data about the mood of consumers and the health of the economy.

After an outstanding reading of 5.9% in June, the markets are predicting a very modest increase of 0.8% for the July release. Given the  recent weak data out of the US, a reading below zero could rattle the markets and hurt the dollar.

Sentiments and levels

Although we have been seeing  some more weak data  out of  the US, the “safe haven” doesn’t have too much room on the downside. The BOJ might intervene if the yen starts to strengthen. Even if such intervention isn’t successful in the long run, it may stop the bleeding. So, the overall sentiment  has turned bullish  on USD/JPY towards this release.

Technical levels, from top to bottom: 79.70, 79.10, 78.40, 77.50, 77, and 76.60.

5 Scenarios    

1. Within expectations: -0.2% to 1.8%: In such a case, USD/JPY is likely to move within range, with a small chance of breaking higher.
2. Above expectations: 1.9% to 2.9%: An unexpected reading well into positive territory can send  the pair  above one line  of resistance.
3. Well above expectations: Above 2.9%: A sharp increase in the indicator could push the pair  above two or more lines of resistance.
4. Below expectations: -0.3% to -2.3%: A reading lower than forecast could send USD/JPY  below one  support level.
5. Well below expectations: Below -2.3%: A sharp decline would signal deep concern about the US economy. In such an outcome, the pair could break two or more  support levels.

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