AUD/USD: Trading the Home Loans Release

After the dust from the rate hike has settled, the Aussie’s busy week continues with a less complex release: home loans. This publication always rocks the Australian dollar. Here are the details, and 5 possible outcomes for the AUD/USD.

Published: Wednesday, 1:30 GMT.

Indicator Background

Most people need a loan from the bank in order to buy a house. So, this indicator reflects the state of the housing sector, and of the whole economy. Many years of rising house prices have made prices quite high. With a high interest rate in Australia, 4.75%, buying a house became quite hard.  

In the past three months, this was joined by a slowing economy, that was mostly hurt from the floods in Queensland. Home loans fell for three consecutive months: 6.3%, 4.7% and only 1.5% last month. All fell short of early expectations.

Given the slowdown in the falls and other factors, a rise of 2.4% is expected now.

Sentiment and levels

The Reserve Bank of Australia left the interest rate unchanged at 4.75%, and somewhat lowered its tone about inflation. Prior to this announcement, the bank was quite hawkish and hinted about upcoming rate hikes to curb inflation.

But following the RBA statement, the terrible GDP number for Q1 and more signs of slowdown, the sentiment around the Aussie is now slightly less bullish than earlier.

Technical levels from top to bottom: 1.1021, 1.0850, 1.0075, 1.07, 1.0580, 1.05, 1.0440 and 1.0315.

5 Scenarios

1. Within expectations: +2% to +3%: A nice rise after all the drops will likely help the Aussie gain within range, but with a low chance of breaking resistance.
2. Above expectations: +3% to +5%: A significant correction of drops will boost the Aussie with an excellent chance of breaking above resistance.
3. Well above expectations: More than +5%: Given the state of the Australian and the global economy, this isn’t likely, but in such a case, a second level of resistance will likely be challenged after one is broken.
4. Below expectations: 0-2%: Such a rise will hardly correct the falls, and is likely to send the pair down, with a small chance of breaking below support.
5. Well below expectations: A drop. Yet another squeeze in the housing sector will trigger worries about a recession, and is likely to send AUD/USD under support. This cannot be ruled out. A negative number is a significant risk to the Aussie.

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