-Tom Kennedy, JP Morgan economist
The AUD/USD pair penetrated an important support level at 0.9346 on Tuesday, indicating the bullish rally is running out of steam. Each new high is lower than the previous, while aggregate technical indicators are sending ‘sell' signals, also supporting the case for pair's depreciation. While technicals are speaking in favour of a downside movement, fundamentals are suggesting the same thing.
With waning investment in the mining sector, policymakers were hoping the housing market will become a new key driver for the economy. However, this is unlikely to happen any time soon. A report from the Australian Bureau of Statistics showed activity in the property market remained healthy in March, however, pulled back from the boom seen over the last several months. The number of new home loans approved sank 0.9% in March, missing analysts' expectations for a 0.5% gain. The figure is significantly below February's 2.9% jump. Additionally, other indicators like auction clearance rates or building approvals were sending worrying signals as well. While Westpac economists believe the market is still on the mend and will continue posting solid growth in the long term, consumers' sentiment has been dampened by constantly increasing prices around buying a property, making it more difficult for owner occupiers to enter into the market.
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