Trading Guide: RBA Statement

At 4:30 am GMT the Reserve Bank of Australia (RBA) will publish its monetary policy decision. Here are some points to remember if you’re planning to trade the event!

What happened last month?

As many had expected, the RBA kept its interest rates steady at 2.50%. What made the Aussie bulls giddy was that the RBA left out the words “scope for further easing” for the third month in a row. Traders took it as a sign that the central bank is comfortable with a strong AUD.

What’s expected this time?

Once again, market players aren’t expecting changes in the RBA’s interest rates. I wouldn’t be surprised to see a bit of jawboning though. After all, just last week RBA Governor Glenn Stevens himself talked down the Aussie by saying that its current levels are unsupported by fundamentals. Yikes!

How does AUD/USD usually react?

AUDUSD_Sept

AUD/USD was already 20 pips ahead when a weak retail sales release pulled the pair back down. It encountered support at the day’s open price before a less-dovish-than-expected RBA statement pushed the pair to new intraday highs.
AUDUSD_Oct
It seems that traders learned their lesson in October when they waited for the worse-than-expected retail sales report to do its worst on the Aussie before they priced in their optimism for the RBA’s decision. Their strategy paid off as the move was quickly faded and AUD/USD made fresh intraday highs all the way to the U.S. session open.

Tips and Tricks

1. Pay attention to the previous day’s inflection points. Based on the charts above AUD/USD tends to consolidate near an inflection point from the previous day. You can either play a break or a bounce off the resistance or support levels if you’re setting orders instead of entering at market.

2. Watch for a one-directional move until the U.S. session open. Unless there’s another major news event that would affect the Aussie before the start of the U.S. session, it looks like trading in the direction of the initial move could still get you pips. Just make sure that you have adjusted (if not closed) your trades before the U.S. reports come in!

3. A word of caution. The tendencies above are just that – tendencies. There’s still no telling how AUD/USD will react especially now that the retail sales data has already been released. Make sure you also consider other scenarios in your trading journals, alright?

Good luck and good trading!