USD/JPY: Trading US Pending Home Sales

The  Pending 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 Monday at 15:00 GMT.

Indicator Background

The  Pending 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  recorded a contraction of 3.5%, well below the market  prediction of -0.6%. However, the  market forecast calls for a rise of 1.1% for the February reading, which would be good news for the housing industry.  Will the indicator get back on track this month and climb into positive territory?

Sentiments and levels

The weak economy and trade deficits which Japan  has been  racking up are weighing on the Japanese currency. Despite these problems, the traumatic events in the eurozone mean that investors are looking for safe havens for their funds, and the yen stands to gain as many investors look to  exit from the euro.

Technical levels, from top to bottom: 83.50, 82.87, 82.20, 81.50, 80.50, 80, and  79.50.

5 Scenarios    

1. Within expectations:  0.7% to 1.5%: In such a case, USD/JPY is likely to rise within range, with a small chance of breaking higher.
2. Above expectations: 1.6% to 2.0%: An unexpected higher reading can send USD/JPY above one resistance level.
3. Well above expectations: Above 2.0%: A sharp increase could propel the pair above a second resistance line.
4. Below expectations: 0.2% to 0.6%: A reading lower than forecast could send USD/JPY below one support level.
5. Well below expectations: Below 0.2%: If the reading is close to zero or dips into negative territory, the pair would likely  break two or more support levels.

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