Forexology

In about approximately 45 minutes, we have the much anticipated Cash Rate decision from Australia being released.

I couldn’t make out much pre-news sentiments on this trade even until this 11th hour, which means that we probably won’t have a clear cut unanimous direction with this trade setup, pre or actual trade setup.

On the background to this release, there is much anticipation that RBA will hike another 25bps to increase its interest rates to 4.25% which will bring it up to 175 bps difference from its next nearest competitor, its sister economy, the Kiwi.

However, experts are split on the opinion for such a decision. Bloomberg did a poll on 23 experts and only 14 were expecting a rate hike as of today itself. Though this slightly weighs in favour of a rate hike, there isn’t a clear speculation in unison of such a sentiment. Also, the charts are showing no such signs of pre-news sentiments building up. To the contrary, aud/jpy and aud/usd have both dropped 60 and 30 pips respectively since market open today.

Therefore, we won’t be taking any pre-news positions on this trade. If there is an interest rate hike as expected, by 25 bps or more(highly impossible but never say no) we could buy aud/jpy. If there is a rate cut(not possible) or a decision to hold(most possible), we might see intermediate weakness in Aud and we can sell Aud/Usd.