USD/JPY: Trading the Existing Home Sales August 2013

US Existing 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 Wednesday at 14:00 GMT.

Indicator Background

Existing Homes Sales provides analysts and investors with a snapshot of the strength of the US housing market, which is 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 is an important gauge of consumer spending in the US economy.

The July reading was a disappointment, falling from 5.18 million to 5.08 million units. The markets had expected a much stronger figure of 5.27 million. The forecast for the August release stands at 5.15 million. Will the indicator improve and beat the forecast?

Sentiments and levels

Both the US and Japan disappointed last week, with some weak releases. However, if US employment numbers continue to improve, speculation will increase about QE tapering, which is a dollar-positive event. The Federal Reserve hasn’t hinted at any imminent moves, but traders should be prepared for some action on this front as early as September. We could see the dollar push back above the 98 line and move to higher ground. So, the overall sentiment is bullish on USD/JPY towards this release.

Technical levels, from top to bottom: 101.44, 100.85, 100, 98.90, 96.71 and 95.00.

5 Scenarios  

1. Within expectations: 5.05M to 5.25M: In such a case, USD/JPY is likely to rise within range, with a small chance of breaking higher.
2. Above expectations: 5.26M to 5.41M: An unexpected higher reading can send USD/JPY above one resistance level.
3. Well above expectations: Above 5.41M: A sharp increase could propel the pair above a second resistance line.
4. Below expectations: 4.89M to 5.04M: A reading lower than forecast could send USD/JPY below one support level.
5. Well below expectations: Below 4.89M. In this outcome, the pair could drop below a second support level.

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

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