Trading The AU RBA Interest Rate Decision, May 5, 2015

AU RBA Interest Rate Decision today is expected move lower as RBA adjust further due to drop in inflationary pressure and crude prices. However, there is a near even split on today’s forecast, therefore we could see volatility in either direction.

Here´s the forecast for this news release:

12:30am (NY Time) AU RBA Interest Rate Decision Forecast 2.00% Previous 2.25% DEVIATION: 0.25% (SELL AUD 1.75% / BUY AUD 2.25%)

The Trade Plan If RBA decides to cut interest rate by 50 basis points, we sell AUD… If RBA decides to keep rate unchanged, we’ll buy AUD as market is expecting a cut today. Ultimately we are a bit bearish on the AUD as RBA has opened the door for rate cuts and considering recent drop in crude prices, RBA definitely have room for rate cuts…

Important Note: The only time I´d recommend a spike trade is when there are so much momentum pushing this currency that regardless of spread and slippage, you should end up in profit if you just hold on to the trade.

I’d recommend to use the Recommended Pairs from above as they are based on my CSM, which should provide the best combination of currency pairs to trade based on better/worse news… of course, you can also trade the default pair: AUDUSD.

Outlook ScoreOutlook score is derived from market sentiment, focus, and economic indicators for the currency. It represents the long-term trend of the currency and its market perception. In short, a strong Outlook Score means more long-term demand for the currency, and a weak Outlook Score is the opposite.

DefinitionAustralian RBA interest rate is often refers to as the “cash rate target”, also called the official cash rate (OCR) or cash rate. This is the Australian base rate. Banks pay this interest rate when they take out a loan with a maturity of 1 day from another bank. By buying or selling bonds and other securities issued by the government the RBA can influence the money supply and thus the cash rate target. A rise or fall in the cash rate often also leads to a change in the interest rates for mortgages, loans and savings.

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