Economists forecast a 0.5% increase in existing home sales for April, following a 4.3% slide in March.

The markets consider the US housing sector a litmus test of the US economy. An improving housing sector environment could bolster consumer confidence. Rising consumer confidence could fuel consumer spending and demand-driven inflation.

Furthermore, housing services inflation continues to attract the attention of FOMC members grappling with sticky inflation. A pickup in demand could further drive housing sector inflation trends higher and delay the timing of a Fed rate cut.

Beyond the numbers, investors should also track FOMC member speeches. FOMC members Raphael Bostic, Loretta Mester, and Susan Collins spoke early in the Wednesday Asian session.

Short-term Forecast

Near-term trends for the USD/JPY will hinge on the upcoming Services PMIs and central bank commentary. A pickup in service sector activity in Japan and weaker numbers from the US could impact buyer demand for the USD/JPY. The BoJ could consider the Services PMI numbers in discussions about a June interest rate hike.

USD/JPY Price Action

Daily Chart

The USD/JPY sat comfortably above the 50-day and 200-day EMAs, sending bullish price signals.

A USD/JPY return to the 157 handle could give the bulls a run at the 158 handle. A break above the 158 handle would support a move toward the April 29 high of 160.209.

On Wednesday (May 22), US housing sector data and central bank chatter need consideration.

Alternatively, a USD/JPY break below the 155 handle could signal a drop toward the 50-day EMA. A fall through the 50-day EMA would bring the 151.685 support level into play.

The 14-day RSI at 57.51 suggests a USD/JPY move to the April 29 high of 160.209 before entering overbought territory.