It’s that time of the month, forex traders! Are you ready to trade the first interest rate decision this week? Check out how you can prepare for the RBA’s announcement!
What happened last month?
In February the Reserve Bank of Australia (RBA) had kept its interest rates at a record low of 2.50%. What made its announcement interesting is that it had dropped its easing bias, saying that a “period of stability” in rates is prudent. What’s more, the central bank had also removed its comments about the Aussie being “uncomfortably high.”
This time around market players aren’t expecting the RBA to make any changes to its monetary policies and its bias on the Aussie. After all, AUD/USD is not too far from its early February levels and no economic report has stood out to warrant any action.
Previous AUD/USD reactions
Back in December Australia had printed a weak retail sales report hours before the RBA’s announcement. And when the central bank didn’t make changes to its rates or its biases, it was easy for the Aussie bulls to step in and push the pair higher.
In February the RBA had a pleasant surprise for the Aussie bulls when it had dropped its easing bias. Since the decision was unexpected, AUD/USD had closed 200 pips above its open price. Yowza!
Tips and Tricks
1. Consider the current market environment. AUD/USD had already experienced sharp declines weeks before the December meeting. And with a lot of traders already gone for the holidays, it was easy for Aussie traders to take profits on their Aussie shorts. February’s price action was a different story because the RBA actually made changes. In fact, some analysts believe that the shift in the RBA’s bias is a game-changer for the comdoll.
2. Pay attention to psychological levels. In both of the charts above we can see that AUD/USD had found resistance or support at psychological levels. It had bounced from the .9050 area in December and had trouble breaking above the .8900 zone in February despite the RBA’s good news.
3. Take note of other economic reports. AUD/USD’s initial decline in December probably would have been stronger had the Aussie bears not seen the weak Australian retail sales report first. Meanwhile, the lack of other major news was probably the reason why AUD/USD had maintained its intraday strength in the February release.
Take note that Australia will release its building approvals report hours before the RBA’s decision. And though Uncle Sam isn’t set to release any major news, we will see the U.K.’s construction PMI data. Don’t’ even think of leaving your intraday trades to the mercy of these reports!