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Dr. Duru, One-Twenty Two (112 clicks)
Long/short equity, event-driven, homebuilders, currencies
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The Australian Bureau of Statistics (ABS) latest report on housing prices in Australia's eight capital cities demonstrates a market that remains hot, especially in Sydney. These increasing prices are no surprise given the Reserve Bank of Australia's round of rate cuts earlier this year. The last four quarters of quarterly price gains have reversed an extended period of sluggish prices. This same response will not add more pressure to monetary policy as the RBA continues to lose its "scope" for reducing rates. As I discussed earlier, the RBA's main gameplan for trying to drive down the Australian dollar (FXA) seems to consist of jawboning and hoping that the U.S. Federal Reserve finally gets serious about tapering its bond purchases (and in turn replaying the pressure on high yield plays seen in the last tapering scare).

Here are the key charts from the report on housing prices:

(click to enlarge)

September, 2013 Report on Australian Housing Prices

Source: Australian Bureau of Statistics

On an annual basis city-by-city, house prices rose as follows: Sydney (+11.4%), Perth (+8.6%), Melbourne (+6.8%), Darwin (+6.0%), Brisbane (+4.1%), Hobart (+1.1%), Adelaide (+1.0%) and Canberra (+0.6%).

As the chart below shows, the Australian dollar responded positively (as of this writing) to the pricing data…just in time too as it looks like the 50-day moving average (DMA) is still holding as support.

(click to enlarge)

The Australian dollar hovers above support at the 50DMA

Source: FreeStockCharts.com

The RBA provides its next rate decision on Tuesday morning (Australian time). This meeting will be a first good test of whether the RBA will directly back up the recent jawboning of Governor Stevens. I will also look to see whether the RBA acknowledges that the heating of the Australian housing market will impact its approach to monetary policy in the coming quarters.

Source: Increasing Australian Housing Prices Promise To Pressure Monetary Policy

Additional disclosure: In forex, I am long the Australian dollar