The Australian dollar is feeling the strain of housing-related headlines today, with mortgage arrears on the rise and dwelling approvals on the decline.
The S&P Global Ratings Agency claim that Australia’s prime and non-confirming mortgage arrears are on the rise, after a historic series of interest rate hikes. Whilst arrears remain beneath their long-term averages and just coming off their record lows, the trend is expected to continue to rise as former and futures RBA hikes finally make their way through the Australian economy.
It shouldn’t come as too much of a surprise given recent hikes, but it may still surprise many who are yet to feel the effects a real recession in recent years.
The building approvals report also revealed just over 12,000 units were approved in January – its lowest level since July 2012 and a 27.6% drop from December. The annual rate is now -8.4%.NSW was the most affected state with a -49% fall in January, with Victoria close behind at -38.6%.
The RBA are still likely to hike by 25bp next week with inflation will over 7%. But we can expect them to pay close attention to these developments, as it aims to cool the economy without completely cracking it.
AUD/USD 4-hour chart:
The 4-hour chart remains within a downtrend, although it trades within a bearish channel / flag, which is assumed to be bearish upon a downside break. Furthermore, the AU-US 2-year yield differential points lower, which could also bring downside pressure to the Aussie.
Yesterday’s high respected the weekly pivot point, but if prices recycle higher within the channel we’d consider bearish setups below 0.6820. Otherwise, a break or 1-hour close below the channel trendline assumes bearish continuation.
— Written by Matt Simpson