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  1. #1
    Specialist Member RCox's Avatar

    Hot RBA Rate Decision to Create Volatility in the AUD/USD !!!

    RBA Rate Decision to Create Volatility in the AUD/USD

    2/5/2013: 22:30 EST

    The first major event risk in the currency markets this week will be the RBA interest rate decision, which does have an expected outcome but some of the macro data suggests the possibility of a surprise. If this is the case, it would not be the first time the RBA has made a surprise decision in recent months. But looking at the relevent factors, majority of analysts are expecting that the RBA will hold interest rates steady at historical lows (3%). Markets are pricing in a 17% chance of a 0.25% rate cut (using overnight index swaps). The number has the potential to spill over into other markets as well, given that Australia is a $1 trillion economy. Pay attention to the accompanying policy statement as well, as this could influence prices if there is no change in rates.

    Recent macro evidence for a decrease in rates include lower than expected numbers in consumer inflation, jobs numbers, and retail sales.

    A decrease in rates would be bearish for the AUD/USD, making the pair ready for PUT options. A "no change" outcome would be bullish (because there is some scope for a decrease), and this would make the AUD/USD ready for CALL options. At time of writing, the levels to watch are 1.0480 to the upside, and 1.0360 to the downside. These numbers will be revised into the number.

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  2. #2
    Junior Member
    Quote Originally Posted by RCox View Post
    RBA Rate Decision to Create Volatility in the AUD/USD

    2/5/2013: 22:30 EST

    The first major event risk in the currency markets this week will be the RBA interest rate decision, which does have an expected outcome but some of the macro data suggests the possibility of a surprise. If this is the case, it would not be the first time the RBA has made a surprise decision in recent months. But looking at the relevent factors, majority of analysts are expecting that the RBA will hold interest rates steady at historical lows (3%). Markets are pricing in a 17% chance of a 0.25% rate cut (using overnight index swaps). The number has the potential to spill over into other markets as well, given that Australia is a $1 trillion economy. Pay attention to the accompanying policy statement as well, as this could influence prices if there is no change in rates.

    Recent macro evidence for a decrease in rates include lower than expected numbers in consumer inflation, jobs numbers, and retail sales.

    A decrease in rates would be bearish for the AUD/USD, making the pair ready for PUT options. A "no change" outcome would be bullish (because there is some scope for a decrease), and this would make the AUD/USD ready for CALL options. At time of writing, the levels to watch are 1.0480 to the upside, and 1.0360 to the downside. These numbers will be revised into the number.

    Click image for larger version. 

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    Very true, Just so everyone knows whenever you have a Rate Decision, Unemployment, Consumer Price Index, Housing Numbers or GDP the markets move. If you know how to read the data and make sure the market doesn't price in the number you can make very good money.

    Signal Coyote

  3. #3
    Specialist Member RCox's Avatar
    I wouldn't say "whenever," context is important. In many cases, these reports will be overlooked. You need to know what the markets are focusing on at a given time.

  4. #4
    Specialist Member LesterK's Avatar
    The RBA rate remain unchanged, but the AUD/USD dropped by 60 pips very quickly, because of the announcement that the RBA could lower the rate even further in the future if the labor market remain in a difficult situation. What do you think for the future of AUD? I think it still is a great currency, much better than the over inflated EUR and USD.

  5. #5
    Specialist Member RCox's Avatar
    Quote Originally Posted by LesterK View Post
    The RBA rate remain unchanged, but the AUD/USD dropped by 60 pips very quickly, because of the announcement that the RBA could lower the rate even further in the future if the labor market remain in a difficult situation. What do you think for the future of AUD? I think it still is a great currency, much better than the over inflated EUR and USD.
    The market reaction came because this was still something of a surprise for the overall outlook in the currency. The AUD is already at historically low levels for interest rates and this is a major factor in whether or not markets look to buy it as a carry trade. The fundamentals in Australia are sound and interest rates are still relatively high but with this news I would not expect any major bull moves for the medium term as it is now clear that the RBA is willing to push rates lower. Central bank comments will have a major influence until the next RBA meeting.

  6. #6
    Senior Member linda_fx's Avatar
    I agree with RCox. The carry trade opportunity is almost close to its end and this will greatly reposition the big players on the AUD. I think in medium term we will see much lower levels, but in long term the good perspective for the Australian economy is still intact.

  7. #7
    Specialist Member marvel's Avatar
    What do you mean medium and long term perspective? I think there are signs of totally opposite development - medium term retracement to 1.04-1.05 and long term downside trend to at least 1.00. The reaction could be faster or slower depending on the overall market sentiment.

  8. #8
    Veteran Member uj.forex's Avatar
    lol.. i miss this pair a little bit... i stopped trading it last year... i had to bear a huge loss just coz of its weird movement on the fundamental data... -_-

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