Aussie pair has eased from the daily high as investors reconsider the risks associated with the Evergrande repayment announced on Thursday. The Aussie pair are consolidating their losses of the previous four days after China’s headlines provoked a dangerous mood. China accounts for more than 35 percent of Australian exports. This bias is serious. Although the People’s Bank of China (BPOC) has left a monetary rate of close to 3.85%, the excess injection of about 110 billion Chinese yuan indicates the ability of the dragon to avoid liquidity. Earlier, Gita Gopinath, chief economist at the International Monetary Fund (IMF), was optimistic about China’s ability to curb fears emanating from real estate.

Australia’s booming housing market is leading to a buildup of consumer debt that could become a risk to financial stability, a top central banker cautioned on Wednesday, while also noting the strength was positive for the economy overall. In a speech on housing, Reserve Bank of Australia (RBA) Assistant Governor Michelle Bullock said regulators were closely watching bank lending standards and household debt as credit growth outpaced growth in incomes.

“A high level of debt could pose risks to the economy in the event of a shock to household incomes or a sharp decline in housing prices,” said Bullock, who heads the RBA’s financial system division. “The strength in the housing market is positive for the economy, and indeed an important channel for monetary policy to support the economy through housing construction, home improvements and purchases of household items,” said Bullock.

The property market has been running hot this year amid record low interest rates and strong demand for suitable work-from-home housing. Data from property consultant CoreLogic showed home prices were up more than 18% in August on a year before, the fastest pace since mid-1989. The national statistician estimated the total value of Australia’s 10.7 million dwellings rose a record A$596 billion ($430.96 billion) in the June quarter, to A$8.9 trillion. The surge has been a windfall to wealth for those that own their homes, but has also pushed housing out of the reach of many first time buyers and fed concerns about affordability.

At the same time the pair extended its decline following a September minute meeting of the Reserve Bank of Australia (RBA). The central bank said the eruption of the delta variance had diverted the economic recovery beyond what had been estimated in the previous month. RBA Governor Philip Lowe underestimated high interest rate expectations before 2024. In addition, New South Wales on Tuesday recorded 1,022 new cases and a re-emergence of the corona virus infection in Victoria. Meanwhile, construction sites in Melbourne were closed for two weeks after a violent vaccination campaign.

Aussie who have seen early market reactions to the PBOC event and Evergrande updates may be waiting for the central bank for new impetus. US topics, however, will join in the direct intermediate moves in the Covid updates and geopolitical talks on Beijing as UK Prime Minister Johnson visits the White House.

AUD/USD 4 Hour Chart:

Support: 0.7209 (S1), 0.7184 (S2), 0.7147 (S3).

Resistance: 0.7270 (R1), 0.7307 (R2), 0.7331 (R3).

Evergrande updates has squeezed the Aussie pair to the downside. We expect a bearish trend for AUD/USD.