Mon, Mar 27, 2023 @ 20:59 GMT
HomeContributorsFundamental AnalysisRising Home Loan Arrears and Falling Dwelling Approvals Weigh on Aussie

Rising Home Loan Arrears and Falling Dwelling Approvals Weigh on Aussie

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
DISCLAIMER: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase of sale of any currency. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

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