AUD/USD: Trading the Australian Building Apr 2013

Australian Buildings Approvals measures the change in the number of new building approvals issued. It is one of the most important indicators of the construction sector. A reading that is higher than the market prediction is bullish for the Australian dollar.

Here are all the details, and 5 possible outcomes for AUD/USD.

Published on Tuesday at 1:30 GMT.

 

Indicator Background

An increase in building approvals indicates an expansion of construction activity, which in turn is a critical component of economic growth. As a market-mover, an unexpected reading can affect the movement of AUD/USD.

Building Permits tends to fluctuate sharply, making accurate predictions a tricky task. The indicator bounced back nicely in the  April release, climbing to 3.1%, well above the estimate of 2.4%.  The markets are expecting a smaller gain in the May reading, with a forecast of 1.2%. Will the indicator again surprise the markets with a strong reading?

 

Sentiments and levels

Australian numbers have not been strong, and the RBA has left the door open for more interest rate cuts, which would hurt the Aussie. Weak US numbers are sending nervous investors to the safe-haven greenback, and if the US continues to post disappointing data, we could see the pair move closer to the parity line. Thus, the overall sentiment is bearish on AUD/USD towards this release.

Technical levels, from top to bottom:    1.0739, 1.0603, 1.0508, 1.0416, 1.0326, 1.0260 and 1.0174.

 

5 Scenarios

1. Within expectations: -1.0% to 3.0%: In such a case, the AUD is likely to rise within range, with a small chance of breaking higher.
2. Above expectations: 3.1% to 6.0%: An unexpected higher reading can send AUD/USD well above one resistance line.
3. Well above expectations: Above 6.0%: Such an outcome would prop up the pair, and a second resistance line might be broken as a result.
4. Below expectations: -4.1% to -1.1%: A  weak reading  could cause the Aussie to drift and lose one level of support.
5. Well below expectations: Below -4.1%: A release deep in negative territory  could cause AUD/USD to drop below a second  support level.

For more about the Aussie, see the AUD to USD forecast.

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