The change in the number of new building approvals issued is an important indicator of the construction industry and for economic activity as a whole.
Here are all the details, and 5 possible outcomes for AUD/USD.
Published on Tuesday at 1:30 GMT.
Indicator Background
Strong growth in new building approvals indicates an expanding housing market, which in turn is a critical component of economic growth as well as consumer spending. Conversely, negative readings indicate a contracting housing market.
Five of the past six readings of the building approvals index have been in negative territory, with a precipitous decline in March 2011 of – 15.9%. However, the forecast for the Aug. 31 release is a 2.1% gain. The index has fluctuated wildly over the past 12 months, and this make accurate forecasting a tricky task.
Sentiments and levels
The index has been on a downward spiral for most of the past six months, and is overdue for a correction. A positive forecast of 2.1% for the Aug. 31 release bodes well for the Aussie. Thus, the overall sentiment is bullish on AUD/USD towards this release.
Technical levels, from top to bottom: 1.0775, 1.0700, 1.0600, 1.0530, 1.0420, 1.0314, 1.0254.
5 Scenarios
- Within expectations: +1.5% to +3.4%: In such a case, the AUD is likely to rise within range, with a small chance of breaking higher.
- Above expectations: +3.5% to +4.8%: An unexpected higher reading can send AUD/USD well above one resistance line.
- Well above expectations: Above 4.8%: The chances of such a scenario are low. Such an outcome would prop up the AUD, and a second resistance line might be broken as a result.
- Below expectations: -1.00% to +1.5%: A smaller gain than forecast or decrease could cause the AUD to drift and lose one level of support.
- Well below expectations: Under -1.00%: Given the recent downward trend in the index, a further decline is a possibility. In this scenario, the AUD will fall and could break a second resistance level.
For more about the Aussie, see the AUD to USD forecast.
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