Forex Signal (Tue April 5, 2011 12:30am EST NY Time) AU RBA Interest Rate...

Henry Liu

Former FPA Special Consultant
RBA (Reserve Bank of Australia) is expected to keep borrowing costs unchanged, as all 25 analysts agree in a survey by Bloomberg… Here’s forecast:

12:30am (NY Time) AU RBA Rate Decision Forecast 4.75% Previous 4.75%

The Trade Plan

If RBA hikes rates, we should jump in (spike trade) and buy AUDUSD or other AUD crosses as the expectation for a rate hike is less than 1%. If RBA decides to keep rates unchanged, we may a sell-off as the accompanied RBA statement may be dovish in light of recent news events.

Important Note: The only time I'd recommend a spike trade is when there are so much momentum pushing this currency that regardless of spread and slippage, you should end up in profit if you just hold on to the trade. For more information on my trading methods, read:
Henry's News Trading Method.

The Market
All 25 analysts (surveyed by Bloomberg) agree that RBA will keep rates unchanged. As a matter of fact, the expectation for the next rate hike, according to all 25 analysts, will be after the September meeting. There is only a 34% of probability for rate hike by RBA for the December meeting.

Therefore, Governor Stevens is likely to keep rates unchanged. Fundamentally, with AUD appreciating to the highest levels in decades offsetting any inflationary pressure, RBA is not in any hurry to hike interest rates any time soon.

Additional Thoughts
I'll be looking for decline in the AUDUSD immediately following RBA's statements. I would probably expect some dovish statement to justify the pause for time being.

Pre-Market Consideration
There will be no pre-news trading today. But if I were to pick a direction, I would be selling AUD.

Historical Chart & Data For RBA Interest Rate Decision


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