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How to Trade US Pending Home Sales: USD/JPY
Submitted by Marcio Pereira on Thu, 26/07/2012 - 11:21
Tradervox.com (Dublin) – Pending Homes Sales in the US is an indicator that shows the level of activity in the housing sector. Any unforeseen reading will affect the dollar/yen pair, and particularly, if the reading is above market expectation, the dollar will react stronger against the yen and other major currencies. The US Pending Home Sales will be released on Thursday at 1400hrs GMT; with the yen strengthening against the dollar a good reading in the housing sector would be good to relieve pressure from the US dollar.
The US Pending Home Sales report will provide critical details about the status of the housing sector, which is an important part of the US economy. Economist and market analysts regard a house as the largest purchase a consumer can make, hence making this indicator an important gauge of consumers’ mood as well as the health of the country’s economy. The reading was remarkable in the month of June, coming in at 5.9 percent. However, the market is predicting a modest growth of 0.8 percent for the month of July. Following weak data that have been released in the US in the recent times, a reading below zero would weaken the dollar and this would force the BOJ to react to curb the strengthening yen.
There is an overall bullish sentiment as we get closer to the release of the report as the dollar remains the most favored safe haven currency –this has changed in the recent times following weak data from the US which has made the yen the better option for safety seekers. However, there is speculation that the BOJ would intervene if the yen continues to strengthen, hence investors are banking on the dollar as we head closer to the release. Some of the technical levels to look at as we head to the release include resistance lines at 79.70, 79.10 and 78.40; the support lines include 77.50, 77 and 76.60.
If the US Pending Home Sales report is within the market expectations, --that is -0.2 to 1.8 percent, the dollar-yen pair is expected to rise within range with little chance of breaking higher. However, if above expectation, --that is between 1.9 and 2.9 percent, the cross might break above a single resistance level. A well above expectation reading would send the pair up, breaking two or more lines of resistance.
On the other hand, if the pair comes in below expectation of between -0.3 to -2.3 percent, the pair will break lower, trading below one support level. However, a well below expectation reading of -2.3 or below would send the cross lower with a higher chance of breaking two or more support levels.
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