AUD/USD – Trading the Home Loans Release

Australia’s publication of the change in home loans is a key indicator for the housing sector and for the whole economy. The release always results in strong moves in the Aussie and provides a trading opportunity.

Indicator Background

The change in the number of loans for homes is important as it reflects the willingness of people to spend money and take risks on the biggest financial asset they’ll ever invest in – their house.

This indicator is closely watched by the RBA when deciding about interest rates. More loans mean that the rates might be too low, and a drop in loans means that rates may be too high. Adjustments in the rates always rock currencies,and the RBA has already proved that it’s ready to act.

Despite the high level of interest rate that Australia has, the country down under enjoyed 6 consecutive months of rises, beating expectations in several occasions. But after these rises, a sharp fall of 4.5% was reported last month, and this hurt the Aussie.

After that shock, expectations currently stand on another big drop of 2.6%.

Sentiment and Technical Levels

The Aussie made huge gains recently, breaking through previous peaks. But it now reached overbought conditions. The rate decision didn’t bring any special news, but it marked a decline. The trend towards the home loans release is slightly bearish for AUD/USD.

Levels to watch out for, from top to bottom: 1.05, 1.04, 1.0315, 1.0254 and 1.0180.

Scenarios

1. Within expectations – a drop of 2.0% to 2.9%: in this scenario, AUD/USD will shake and may make a small slide, but nothing serious.
2. Above expectations: a drop of 0.5% to 2%: in this scenario, AUD/USD will make gains, but is unlikely to breach technical levels.
3. Well above expectations: a drop of 0.4% or better, even a rise: AUD/USD will rise and can definitely break above resistance levels.
4. Below expectations: a drop of 3 to 4.5%: AUD/USD will slide, and has a small chance of breaking below support.
5. Well below expectations: a drop of 4.6% or worse: AUD/USD will fall, with a good chance of losing at least one level of support.

For more technical levels, analysis and further events, see the AUD/USD forecast.