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AUDUSD Analysts Predict Mortgage Crisis Amid RBA Rhetoric

2/20/2023 10:45 AM

The AUD/USD pair shows a noticeable increase, trying to recover from last week's decline. The instrument is testing the level of 0.6890 for a breakout, receiving support from technical factors. The American currency is still in high demand, as market participants suggest that the US Federal Reserve will maintain its "hawkish" rhetoric in the near future and continue to raise interest rates. In addition, markets fear an escalation of the military conflict between Russia and Ukraine, which is increasingly affecting the European economy.

The Australian dollar is reacting positively to improved forecasts for the Chinese economy, which continues to recover after the country's authorities abandoned the policy of zero tolerance for COVID-19. Today it became known that the People's Bank of China decided to keep the interest rate at 3.65%. Tomorrow, investors will pay attention to the publication of the minutes of the last meeting of the Reserve Bank of Australia (RBA), as well as data on business activity in the services sector from Commonwealth Bank and in the manufacturing sector from S&P Global for February.

In the meantime, as experts predict, in Australia, against the background of the continuation of the "hawkish" policy of the regulator and the increase in the interest rate to a ten-year high at 3.35%, a full-scale mortgage crisis may begin this year against the backdrop of the expiration of approximately 800.0 thousand loans issued at a record low fixed rate during the coronavirus pandemic. Given the new economic realities, the cost of borrowing will rise sharply and, according to analysts at consulting firm KPMG Australia, with an average mortgage of 600.0 thousand Australian dollars, fixed rate homeowners can expect an increase in interest payments by 16.500 thousand Australian dollars per year. The pressure on households will be reflected in their consumption, so the RBA is preparing for a more serious slowdown in economic activity than previously thought, which could lead the national economy into recession.

Bollinger Bands on the daily chart show a steady decline. The price range is narrowing, reflecting the emergence of multidirectional trading dynamics in the short term. MACD is still declining keeping a weak sell signal (located below the signal line). Stochastic approaching the level of "20" is trying to reverse into an upward plane, indicating the risks of corrective growth in the near future.

Resistance levels: 0.6900, 0.6950, 0.7000, 0.7050. | Support levels: 0.6850, 0.6800, 0.6750, 0.6700.

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