Awards2013


US Pending Home Sales is released every month, and provides analysts with a snapshot of activity in the housing sector. A higher reading than the forecast is bullish for the dollar.



Indicator Background


As a home purchase is likely the most expensive purchase a consumer will make, the indicator provides an important measure of consumer confidence and the health of the US economy.


Pending Home Sales has been erratic, making accurate forecasts a tricky task. In the April reading, the indicator climbed 1.5%, beating the estimate of 1.1%. The forecast for the upcoming reading stands at 1.3%. If the indicator does remain in positive territory, it will be the first time it has posted consecutive gains since December.



Sentiments and levels


The markets have been focusing on the tapering question in the US and the crash of the Japanese stock market. The US dollar has enjoyed some support from growing speculation that the Federal reserve may scale back the current round of QE. The euro remains under pressure, given the weak GDP numbers, talk about negative rates and even the call for the ECB to “manage the euro lower“. The deep issues in Italy and Spain were never resolved, and could once again cause a crisis in the Eurozone.


In the US, the mixed numbers continue, but we are seeing some improvement nevertheless –  better than expected new home sales, a drop in jobless claims and a rise in durable goods orders provide support for tapering QE sooner than later. While the timing remains open, it seems more probable that the next move of the Fed will be to reduce bond buys rather than to increase them. Such a move should give a boost to the US dollar. So, the overall sentiment is bearish on EUR/USD towards this release.


Technical levels, from top to bottom: 1.3000, 1.2960, 1.2890, 1.2840 1.28 and 1.2750.



5 Scenarios 



  1. Within expectations: -1.5% to 3.5%: In such a case, the EUR/USD is likely to move within range, with a small chance of breaking higher.    




  2. Above expectations: 3.6% to 5.6%: An unexpected strong increase could send EUR/USD below one support level.    




  3. Well above expectations: Above 5.6%: A sharp spike in the indicator could push the pair below two or more support levels.    




  4. Below expectations: -3.6% to -1.6%: A weaker reading than forecast could push the EUR/USD above one resistance level.    




  5. Well below expectations: Below -3.6%: A sharp contraction would likely hurt the US dollar, and we could see the pair push above two or more resistance levels.