– Reserve Bank of Australia (RBA) to Keep Cash Rate on Hold for Thirteen-Consecutive Months.
-Will Governor Glenn Stevens Continue to Implement the Verbal Intervention?
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Trading the News: Reserve Bank of Australia (RBA) Interest Rate Decision
Even though the Reserve Bank of Australia (RBA) is widely expected to keep the benchmark interest rate at 2.50% in November, the AUD/USD remains vulnerable to further losses as Governor Glenn Stevens retains the verbal intervention on the aussie.
What’s Expected:
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Why Is This Event Important:
Indeed, the central bank head may even take a more aggressive approach in jawboning the local currency amid the slowing recovery in China – Australia’s largest trading partner – and we may see renewed bets for additional monetary support on the back drop of the weakening outlook for global growth.
Expectations: Bearish Argument/Scenario
Release
Expected
Actual
Consumer Price Index- Trimmed Mean (YoY) (3Q)
2.7%
2.5%
Employment Change (SEP)
15.5K
-29.7K
Retail Sales (MoM) (AUG)
0.4%
0.1%
The persistent slack surrounding the region may push the RBA to adopt a more dovish tone for monetary policy, and the AUD/USD may mark fresh lows over the near-term should the RBA toughen the verbal intervention to further assist with the rebalancing of the real economy.
Risk: Bullish Argument/Scenario
Release
Expected
Actual
Private Sector Credit (YoY) (SEP)
5.3%
5.4%
AiG Performance of Construction Index (SEP)
—
59.1
Gross Domestic Product s.a. (QoQ) (2Q)
0.4%
0.5%
However, we may get more of the same from Governor Stevens as the central bank head remains confident in achieving a sustainable recovery, and the AUD/USD may continue to face range-bound prices if the RBA shows a greater willingness to normalize monetary policy in the year ahead.
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How To Trade This Event Risk(Video)
Bearish AUD Trade: RBA Continues to Embark on Verbal Intervention
Need red, five-minute candle following a dovish statement for a potential short AUD/USD trade
If market reaction favors a short aussie trade, sell AUD/USD with two separate position
Set stop at the near-by swing high/reasonable distance from entry; look for at least 1:1 risk-to-reward
Move stop to breakeven on remaining position once initial target is met, set reasonable limit
Bullish AUD Trade: Governor Stevens Drops Dovish Tone
Need green, five-minute candle following the meeting to consider a long AUD/USD position
Carry out the same setup as the bearish aussie trade, just in the opposite direction
Read More:
Price & Time: Where To Next For USD/JPY?
Monetary Policy on Trial with RBA, ECB, and NFPs this Week
Potential Price Targets For The Release
Chart – Created Using FXCM Marketscope 2.0
Downside targets favored for AUD/USD as it fails to retain the series of higher-lows; bearish break in RSI favors ‘selling bounces.’
Interim Resistance: 0.8840 (23.6% retracement) to 0.8865 (61.8% expansion)
Interim Support: 0.8600 pivot to 0.8610 (38.2% expansion)
Impact that RBA interest rate decision has had on AUD during the last release
Period
Data Released
Estimate
Actual
Pips Change
(1 Hour post event )
Pips Change
(End of Day post event)
OCT 2014
10/07/2014 3:30 GMT
2.50%
2.50%
-2
+44
October 2014 Reserve Bank of Australia (RBA) Rate Decision
The Reserve Bank of Australia (RBA) stuck to its current policy and left the target cash rate at the historical low for another month, but went onto say that the Australian dollar remains high relative to the decline in commodity prices as the central bank continues to see a period of interest rate stability in the $1T economy. Despite the verbal intervention, the AUD/USD traded above the 0.8800 handle following the rate decision, but struggled to hold its ground throughout the day as the pair closed at 0.8793.
— Written by David Song, Currency Analyst and Shuyang Ren
To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong.
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Source: Daily fx
