Forex Trading Signals by Magister Pips, 2012/02/06
Forex News Trading Signal for Australia RBA Cash Target
22:30 AUD RBA Cash Target (4.0% exp, 4.25% prior, 4.00% to 4.25% range)
Out of 27 analyst estimates, only 3 expect the RBA to hold rates steady at 4.25%, the remaining
24 all expect a 25 bps cut to 4.00%.
Last time on the December 5th 2011, there was a more even split with 12 expecting a hold of 4.50%
and 13 expecting a cut. When they cut last time there was an intial 40 pip spike, a 50% or 20 pip
pullback over 3 minutes, followed by a further push lower for a total 45-50 pips over 13 minutes
(a 30 pip afterspike trade). An hour or so of consolidation then occurred, with a new low made a
half hour before the London open, for a total of about 80-85 pips for the asian session. As Europe
got going all these losses quickly vanished as the pair shot up again back to pre-release to find
former resistance but the New York session dragged it up more, seemingly defying gravity.
October 31st was also had quite mixed estimates with 11 expecting the RBA to hold at 4.75% and 16
expecting a 25 bps cut to 4.50%. A similar 45-50 pip initial spike, followed by a 50% or 20-25 pip
retracement over 2-3 minute and a new low 5-6 minutes after the release for a total of 50-60 pips.
After an hour of consolidation thou the sell-off thru the rest of the Asian session was more pronounced
than the December 5th release. 2 Hours after the release the pair was 100 pips lower, but as Europe
woke up the down-run continued. About an 1.5 hours after london opened the pair was anothe 120 pips
lower for a total of 220 pips. After some retracement the USA woke up and they sold as well moving it
down another 60 pips. Basically a run thru 3 sessions from 1.0525 to 1.0275 more or less.
So now we have all the analysts jumping on the 'RBA Cut' bandwagon, and the Central Bank has done so the
past 2 times in a row. Could they pause this time. The RBA, perhaps because of its trading with China
is not shy on changing its rate policy when they need to, back in October 2009 they hiked 25 bps 3
meetings in a row, going from 3.00% to 3.75% without a pause, then they had 1 pause, then hiked 25 bps 3
more meeting in a row in early 2010, going to 4.5%. Anything is possible tonight. The AUDUSD has been
doing quite well since December 2011, the 4 hour trend channel is very tight narrow uptrend. If the RBA
cut the AUDUSD pair should loose some ground, even they are expected to do so, because the pair has held
onto its gains from the FOMC and NFP risk-on sentiment. If it looses these before the release then it
becomes more risky to short the pair on a hike. If the RBA do not cut there should be some additional
upside. Last night the Retail Sales figure did come out a bit lower, but not a huge amount. There was
some risk-off in Europe but things bounced back up during the US session, putting the AUDUSD right in the
middle of its range of the past 2-3 sessions and there is potential for a move either way. If you do
short a 'Cut as Expected' make sure you set your stop and don't give it too much room. Ideally it will
start to move down in confirmation quite soon, otherwise it might not be worth holding overnight.
Headline driven news from Europe will start to dominate the risk-on/off and could easily turn things
around. Even at 4% the Aussie Dollar has an attractive yeild in the current economic environment and
the 'Carry Trade de jour' - short EURAUD could start to find new offers if it retraces up on this cut,
and when it does this could again support other AUD pairs.
If they hold rates, AUD/USD & 6A should rally 30-60 pips/ticks.
If they lower rates, AUD/USD & 6A should sell off 30-60 pips/ticks.
- be careful on the sell as this is expected, only recommended because AUDUSD is near highs
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