Forex Signal (Tue August 3, 2010 12:30am EST NY Time) AU RBA Interest Rate

Henry Liu

Former FPA Special Consultant
Messages
473
RBA (Reserve Bank of Australia) is expected to hold borrowing costs steady for the third consecutive meeting in August, as all 23 analysts unanimously agree in a survey by Bloomberg… Here’s forecast:

12:30am (NY Time) AU RBA Cash Rate Decision Forecast 4.5% Previous 4.5%
ACTION: AUD/USD BUY 4.75%


The Trade Plan
However unlikely, in the event that RBA decides to surprise the market by hiking interest rate up by another 25 basis points to 4.75%, we should see an immediate buying of AUD, therefore we'll jump in on AUD/USD in a LONG trade following my spike trading method.

Because of the surprise factor and the general shift in fundamental sentiment if RBA were to hike rates, AUD/USD could stay in a uptrend for the rest of the month, therefore a spike trade is totally justified.

For more information on my trading methods:
Henry's Spike Trading Method.

The Market
The immediate future policy for RBA may be that of a “wait and see” as most analysts are expecting RBA to also hold rates unchanged until possibly towards the end of 2011. This will undoubtedly add pressure to the AUD, or perhaps keep AUD in a very tight trading range as the market wait for RBA to make the next move. As a matter of fact, Credit Suisse overnight swap index is pricing RBA to hike about 22 basis points in the next 12 months… therefore we are not likely to get surprised today.

Furthermore, based on the Sydney Futures Exchange data, RBA's probability of a rate hike dropped from 28% last week before the quarterly CPI release, to about zero percent today; and at a closer look to the Core CPI q/q reading, we are seeing that 2nd Quarter Inflation is at 2.7%, well within the range of RBA's target (between 2~3%), reaching the conclusion that RBA does not need to hike rates

Additional Thoughts
Gov. Glenn Stevens will be releasing an accompanied statement along with RBA's rate decision. Any hints of a further pause should drive down the market significantly. If Stevens is optimistic and feels that another rate hike is coming, then expect demand for AUD rise. In the absence of clear direction from the rate decision, Stevens' statement will determine the market today. However, just note that most central bankers are not in the business of scaring the market, it is likely to see a cautious tone today, reiterating all recent rhetoric... But just be prepared if Stevens had too much to drink and decides to have a little fun.



Pre-Market Consideration
Looking at the general market optimism today, starting with HSBC and BNP Parribas topping earning expectations and blowing any concerns of risk aversion sentiment or sovereign debt crisis to the smitherines, I have to say that AUD may remain strong and well support for the time being, therefore we may not get a chance to SELL it until after the release today...

Historical chart and data for RBA Interest Rate.


Thanks,


Henry
 
Last edited by a moderator:

iykiatelecom

Recruit
Messages
6
figure

sir , am new to news trading, so am just wondering which sit to monitor news release figure as to make use of it on time. thank u
 

R C Douglas

Recruit
Messages
2
Henry,

For those of us who took a long SELL position on the AUD/USD last week as recommended, do we continue to Hold if RBA interest rate remains unchanged? And Sell if there is a surprise increase? Thank you.
 

DaveO

Private, 1st Class
Messages
60
For those of us who took a long SELL position on the AUD/USD last week as recommended, do we continue to Hold if RBA interest rate remains unchanged? And Sell if there is a surprise increase? Thank you.
I had symmetry on the move up from the May low at 0.9097 which it now appears to have cleared. My next upside target is at the 127% ext at 0.9310 or somewhere inbetween. If risk appetite continues the target could be realistic. If not, expect a reversal at any time soon.
 
Top