Forex Signal (Tue June 7 2011, 12:30am NY Time EST) - AU RBA Interest Rate

Henry Liu

Former FPA Special Consultant
RBA (Reserve Bank of Australia) is expected to keep borrowing costs unchanged at 4.75%, as per the wide market consensus…

Here´s the forecast for this news release:

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 very unlikely. If RBA decides to keep rates unchanged, we may see 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 Liu's News Trading Method

The Market
Most analysts, 23 out of 28, agree that RBA will once again keep rates unchanged at 4.75%, with only 5 analysts believe that RBA may hike rates to 5.00%. On one hand, we have global economy recovery showing signs of slowdown, the “costliest natural disaster” in Australian history, and European debt crisis woes, RBA may continue to pause its official rate until Q3 of this year. However, on the other hand, with Household spending reaching a the highest in 17 months, lowest unemployment rate in history, plus high demand for Australian currency, RBA may indeed look to raise interest rate in Q3…

Also understand that Household Spending accounts 55% of AU GDP… a surge in this category will inevitably add to higher economic activities, which ends up pushing inflation higher… RBA is known to be ahead of the curve when it comes to inflation…

Additional Thoughts
Governor Stevens is likely to keep rates unchanged, this time. 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.

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

Historical Data & Chart for RBA Interest Rate


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