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RBA Cut Rates to 2% – Forex Trading Tips
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Originally updated: 08:00
Trading Bias: neutral
Currency pair: –
Current Sentiment:
Recently RBA cut rates to a record low of 2%. This was widely expected by the market and as such the downside reaction was capped.
The accompanying statement was not too dovish as the RBA cited improved demand and high employment, and inflation being in line with long term goals. After the AUD spiked lower it rallied 140 pips from the lows as the market does not see any future cuts for now.
Fundamentals:
The USD remains the strongest currency in the longer term. However the medium-term direction depends on data.
The EUR remains fundamentally weak and the Greek debt issue, although seems to have taken a back seat, is ongoing.
GBP is starting to see the downward pressure exerted from election uncertainty. Expect a huge amount of volatility on GBP pairs and protect any trades with stops and smaller trade sizes if unsure.
AUD is neutral now that the rate cut has passed. In relative terms, Australia has a reasonably strong economy especially with excellent employment figures of late.
NZD is relatively neutral with an easing bias. We will watch data to indicate the chance of a cut in the near-term.
CAD remains on the weaker side of neutral until we see more data or direction from the BOC. CAD will take most of its direction from any significant changes in the price of West Texas Intermediate crude oil.
JPY remains weak but the market will likely need a new bout of easing to sustain another fall. In the meantime, the sentiment on the JPY can turn bullish very quickly if there is uncertainty in the markets. Watch GBPJPY for the elections.
CHF is a weaker currency given the SNB’s negative interest rates, however it is highly susceptible to volatility due to SNB potentially intervening to weaken the currency. CHF often will take direction from the EUR with which its correlation over the last 50 trading days is 74%. CHF may also strengthen on uncertainty.
Technicals:
We await any tradeable news for direction in the markets. We will be watching support and resistance levels for entries and exits in line with fundamental news.
Other Market Moving News:
Later we have Spanish Unemployment Change which may give the Euro direction if it comes out with high deviation.
Construction PMI from UK may help GBP move lower if it comes out worse.
US ISM Non-Manufacturing PMI will likely give the USD some direction.
NZD GDT should be watched closely as another negative reading will mean four in a row and this will put pressure on NZD.
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