AUD/USD: Trading the Australian Home Loans

The change in loans for homes is an important measure of the housing sector, and for the economy as a whole. The event is set for the very beginning of the week. This can set the tone for the whole week.

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

Published on Monday at 00:30 GMT.

Indicator Background

For most people, buying a house is the biggest financial transaction in their life, and it usually requires taking a loan. So, the change in the number of loans is a good gauge for the economy at large.  

In Australia, there are growing fears that the Australian housing bubble is about to burst. There are already talks about a slowdown in this sector, and a flattening out of prices in the better scenario, or a US-style crash in prices. This is still to be seen.

This has been quite a volatile indicator in recent months. The negative record was in the data for January: loans fell by 6.3%. They continued falling afterwards, and made a big leap as correction: 4.8% in the figures for April, published last month.

Another month of correction is expected now, with a rise of 4.5% in May. This will show that the housing sector made a dip and is now on the rise once again. A drop will create long term worries about the aforementioned bubble.

Sentiment and Levels

While the  disastrous Non-Farm Payrolls in the US triggered global fears, the Aussie showed resilience. In addition, Chinese data released over the weekend has shown that the economic giant and Australia’s No. 1 trade partner is still growing fast. So, the overall sentiment is bullish on AUD/USD towards this release.

Technical levels, from top to bottom: 1.1021, 1.0921, 1.0888, 1.0775, 1.0670, 1.0580 and 1.05.

5 Scenarios

1. Within expectations: +3.5% to +5%: In such a case, the Aussie is likely to rise within range, with a small chance of breaking higher.
2. Above expectations: +5% to +7%: A second month of strong recovery can send AUD/USD well above one resistance line.
3. Well above expectations: Above +7%: The chances of such a scenario are low. A second resistance line might be broken on such an outcome.
4. Below expectations: +1% to +3.5%: A slower rise will probably cause the Aussie to shake and slide, but it is unlikely to send it below support.
5. Well below expectations: Under +1%: After last month’s big rise, a small rise or even a drop in home loans cannot be ruled out. In this scenario, a drop under support is likely.