Poor housing data sends USD/JPY lower

As April housing data winds down, the New Homes Sales print was ugly at -16.6% MoM. Expectations were for -1% MoM vs -10.5% MoM in March. The actual number of 591,000, seasonally adjusted, was the lowest reading for new home sales since April 2020 and well below the expectations of 750,000. This follows last week’s print of Existing Home Sales, which was down -2.4% in April. The actual seasonally adjusted rate was 5,610,000, the lowest level since June 2020. Tomorrow the US will release the MBA 30-Year Mortgage Rate for the Week of May 20^th. Last week the rate was 5.49%. Recall that as recently as February, mortgage rates were below 3.5%. The quick, large increase in mortgage rates is one of the main factors that has led to lower home sales.

What are economic indicators?

On the back of poor housing data, a risk-off move ensued, and USD/JPY was on the move lower. The pair had been rising until recently, from a low of 114.65 on March 4^th to a high of 131.25 on May 9^th! However, since then, USD/JPY has been pulling back, thus forming a Head and Shoulders pattern. With today’s move lower of 130 pips, USD/JPY broke through the neckline of the pattern and is on its way towards the target. The target for a Head and Shoulders pattern is the height from the head to the neckline, added to the breakdown point. In this case the target is near 123.70.

Source: Tradingview, Stone X

Trade USD/JPY now: Login or Open a new account!

• Open an account in the UK
• Open an account in Australia
• Open an account in Singapore

On a 240-minute timeframe, USD/JPY has stalled at the 50% retracement level from the low of March 31^st to the high of May 9^th, near 126.31. If price is to reach the head and shoulders target, it must not only break below this level, but also horizontal support at 125.10, which confluences with the 61.8% Fibonacci retracement level from the same timeframe. Below there, price can fall to the March 4^th low at 121.28. Horizontal resistance is just above current price at 127.02. Above there, USD/JPY can move up to the highs from May 20^th at 128.30, then a confluence of horizontal resistance at 129.78 and the psychological round number resistance level of 130.00.

Source: Tradingview, Stone X

Weaker US housing data sent the markets into risk-off mode, dragging USD/JPY lower with it. Will the pair continue to move lower towards its head and shoulder target? If so, it may have to come at the expense of more risk-off in the markets.

Learn more about forex trading opportunities.

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

StoneX Financial Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit www.cityindex.com/en-sg/terms-and-policies for the complete Risk Disclosure Statement.

ALL TRADING INVOLVES RISKS. LOSSES CAN EXCEED DEPOSITS.

City Index is a trading name of StoneX Financial Pte. Ltd. (“SFP”) for the offering of dealing services in Contracts for Differences (“CFD”). SFP holds a Capital Markets Services Licence issued by the Monetary Authority of Singapore for Dealing in Exchange-Traded Derivatives Contracts, Over-the-Counter Derivatives Contracts, and Spot Foreign Exchange Contracts for the Purposes of Leveraged Foreign Exchange Trading. SFP is also both Derivatives Trading and Clearing member of the Singapore Exchange (“SGX”). SFP is a wholly-owned subsidiary of StoneX Group Inc.

The information provided herein is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to invest, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk.

The information does not represent an offer of, or solicitation for, a transaction in any investment product. Any views and opinions expressed may be changed without an update. To understand the risks and costs involved, please visit the section captioned “Important Information” and the “Risk Disclosure Statement”.

The information herein is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.

StoneX Financial Pte. Ltd. 1 Raffles Place, #18-61, One Raffles Place Tower 2, Singapore 048616. Tel: 6309 1000. Co. Reg. No.: 201130598R.

This advertisement has not been reviewed by the Monetary Authority of Singapore.