Australia Interest Rate Ideas — ECONOMICS:AUINTR

Mortgage Product Bias Mortgage Product Bias Indicator Overview: The "Mortgage Product Bias" indicator is designed to assist investors, analysts, and mortgage brokers in identifying trends and potential biases in the mortgage products market. This tool evaluates the relative positioning of the RBA (Reserve Bank of Australia) cash rate against a calculated average interest rate over a specified period, providing insights into whether market conditions favor fixed or variable rate mortgage products. Functionality: Data Sources: The indicator utilizes real-time data from the RBA cash rate (AUINTR), integrating these values to generate insights based on historical averages. Average Interest Calculation: Utilizes a user-defined number of months (default is 7 months) to calculate the exponential moving average (EMA) of the cash rate, which represents the average interest rate over the specified period. Bias Identification: Determines the bias towards fixed or variable rate products: Fixed Rate Bias: Triggered when the current cash rate is higher than the average interest rate, indicating a potential market leaning towards fixed-rate products. Variable Rate Bias: Triggered when the current cash rate is lower than the average interest rate, suggesting a favorable condition for variable rate products. Usage: For Investors: Use this indicator to gauge the best times to enter into fixed or variable rate mortgage agreements based on historical pricing trends. For Analysts and Mortgage Brokers: Provides a visual tool for advising clients, preparing reports, and making data-driven decisions in the mortgage industry. Visual Elements: Color-coded Display: Red indicates a fixed rate bias. Green indicates a variable rate bias. Gray indicates neutral conditions where the cash rate aligns closely with the average rate. Horizontal Line: Represents the threshold level at -0.5% to highlight significant deviations in the cash rate from the average. Implementation: To use the Mortgage Product Bias indicator, simply add it to your TradingView chart from the Indicators menu and configure the length of the average interest rate calculation as needed. The tool is designed for ease of use and can be customized to fit individual or institutional analysis workflows. Disclaimer: This indicator is intended as a tool for financial analysis and decision-making. Users should consider additional factors and conduct comprehensive market research before making financial decisions based on this indicator.

Inflation not down under!Australia's CPI data, released yesterday, showcased figures hotter than anticipated. While this may not be 'reaction-worthy' news on its own, the scenario in Australia is worth delving into for several reasons. Inflation Trends Initially, let's consider inflation trends. In most western economies, although inflation remains above central bank targets, the trends are on a downward trajectory. However, when juxtaposed against those for the European Union (EU) and the United States (US), Australia's (AU) inflation rates on a month-over-month (MOM) and year-over-year (YOY) basis still stick out from the norm. Moreover, yesterday’s CPI prints surpassed consensus on both the YOY & MOM basis, indicating a notable deviation from expectations. In fact, Australia's YOY CPI is now on its longest streak above inflation expectations, and crucially, inflation expectations have ceased revising downwards. Given the higher inflation levels compared to its peers, consensus estimates, and expectations, inflation remains a significant concern for Australia. Interest Rates In the realm of interest rates, Australia has been a long-standing “pauser,” having maintained its policy rate unchanged since its June meeting. This prolonged pause now further opens the leeway to raise rates, especially given the “watch and see” approach adopted towards burgeoning inflation. Additionally, its interest rates remain low compared to the US, EU, Canada, and even New Zealand. As a result, on the real rates basis, Australia trails far behind, with its policy rate still 1.3% behind its inflation rate, significantly less restrictive compared to other economies that have already moved into positive real rates territory. We posit that the RBA is behind the curve and has room to react, given the considerably long period of pause and still negative real rates. The market seems to echo this sentiment too, as the odds for a hike in the next meeting surged post the CPI news, moving from 21% to 55%! Against multiple currencies, the AUD appears to be threading above the long-term support level, a threshold that has essentially defined AUD low. This strong support is expected to hold, given its tested and respected level across multiple currency crosses since 2020. Policy turning points between the two currencies, as indicated by the turn in the interest rate differential, have generally marked the trend change for the currency, notably for the AUDEUR pair. Given the persisting high inflation in Australia compared to various economies and metrics, should market expectations trend in the right direction, it's plausible the Reserve Bank of Australia (RBA) may react with a rate hike. This action could tilt the rate differential and interest for the AUD, bolstering the currency. To capitalize on this bullish view on the AUD, we can consider a long position on the AUDEUR. We can set up this trade via a long position on the CME Australian Dollar Futures and a short position on the CME Euro FX futures to create a synthetic long AUD/EUR position at the current price level of 0.5951, stop at 0.5865 and take profit at 0.615. Given that one CME Euro FX futures is for 125,000 Euros and one CME Australian Dollar Futures is for 100,000 Australian Dollars, this suggest that we should use two Australian Dollar Futures to one Euro FX Futures to match the contract size, given that 125,000 Euros is roughly equivalent to 210,000 Australian Dollars at the prevailing exchange rate. Each 0.00005 increment in the Australian Dollar Futures is equal to 5 USD and each 0.00005 increment in the Euro FX Futures is equal to 6.25 USD. The charts above were generated using CME’s Real-Time data available on TradingView. Inspirante Trading Solutions is subscribed to both TradingView Premium and CME Real-time Market Data which allows us to identify trading set-ups in real-time and express our market opinions. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com Disclaimer: The contents in this Idea are intended for information purpose only and do not constitute investment recommendation or advice. Nor are they used to promote any specific products or services. They serve as an integral part of a case study to demonstrate fundamental concepts in risk management under given market scenarios. A full version of the disclaimer is available in our profile description. Reference: www.cmegroup.com www.cmegroup.com melbourneinstitute.unimelb.edu.au www.rba.gov.au www.asx.com.au www.cmegroup.com

AUUR-AUINTR HEADING FOR CONVERGANCE?The Interest rates are inversely correlated to unemployment rates in Australia. The last time they intersected was 2008 GFC, and they appear to be headed the same way, with unemployment forecast for 4.8% in Q12024. - Takeaways When interest rates are up unemployment is down and vice versa Last time they had a major divergence/convergence was a global economic event (GFC, COVID) Any thoughts let me know in comments?

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Australia interest rate

AUINTR trade ideas