Navigating through the RBA Interest Rate Decision : AUDUSD
The market is pricing in for the RBA to cut their interest rate from 1.00% to 0.75%. Personally, I always stay on the sidelines during interest rate risk events. The reason is how unpredictable the market reaction going to be.
I believe that institutions use risk events to get liquidity via stop hunts/ price manipulation hence the spike direction has no correlation (at most case) with the rate decision. "Interest Cut = bearish for the currency" is the basic thing being taught to every trader. Tho it has some degree of truth in it but it is not that easy, traders should put this in their head: Stop Hunters loves big news events.
For example, on July 2nd, 2019. RBA decided to cut their rates and
the intraday direction of that day after the interest rate decision was UP. The reaction news spike did go down tho. Whoever went short (via trading the news) probably got some pips (if they get filled at the price they wanted, which is very rare!) but high chance get stopped out because traders logic suggests AUDUSD should go down because "Interest Cut = bearish for the currency"
So it is not that simple.
Another example, on June 4th, 2019, RBA cut their rates and interestingly the reactionary spike was not down but up and then the price closed below the 12.30pm (Singapore time) candle open. The intraday trend later that day was up. "Interest Cut = bearish for the currency"?
This is an example last May when the RBA decided to keep their interest rate. This time the reactionary candle moved exactly the traders logic of "Interest Cut = bearish for the currency". However, that's the only bullish move AUDUSD made that day, in fact AUDUSD went down days after that. All these reactionary candles are traces of stop hunts happening during big news event, and RBA cash rate decision is prone to this as well. I will not trade before and during the risk event, the soonest I would trade this is 30 minutes after the decision rate and/or after the RBA governor's speech (if there's any)
Technically, I am still bearish AUDUSD. Whatever decision RBA makes on Tuesday, I believe its almost fully priced in. I am anticipating some random news spike on Tuesday however and if that spike tapping in the levels at the upside, then that would be awesome because I could short AUDUSD at a better price. That's probably the only way I would "trade" the news spike.
I believe that institutions use risk events to get liquidity via stop hunts/ price manipulation hence the spike direction has no correlation (at most case) with the rate decision. "Interest Cut = bearish for the currency" is the basic thing being taught to every trader. Tho it has some degree of truth in it but it is not that easy, traders should put this in their head: Stop Hunters loves big news events.
For example, on July 2nd, 2019. RBA decided to cut their rates and
the intraday direction of that day after the interest rate decision was UP. The reaction news spike did go down tho. Whoever went short (via trading the news) probably got some pips (if they get filled at the price they wanted, which is very rare!) but high chance get stopped out because traders logic suggests AUDUSD should go down because "Interest Cut = bearish for the currency"
So it is not that simple.
Another example, on June 4th, 2019, RBA cut their rates and interestingly the reactionary spike was not down but up and then the price closed below the 12.30pm (Singapore time) candle open. The intraday trend later that day was up. "Interest Cut = bearish for the currency"?
This is an example last May when the RBA decided to keep their interest rate. This time the reactionary candle moved exactly the traders logic of "Interest Cut = bearish for the currency". However, that's the only bullish move AUDUSD made that day, in fact AUDUSD went down days after that. All these reactionary candles are traces of stop hunts happening during big news event, and RBA cash rate decision is prone to this as well. I will not trade before and during the risk event, the soonest I would trade this is 30 minutes after the decision rate and/or after the RBA governor's speech (if there's any)
Technically, I am still bearish AUDUSD. Whatever decision RBA makes on Tuesday, I believe its almost fully priced in. I am anticipating some random news spike on Tuesday however and if that spike tapping in the levels at the upside, then that would be awesome because I could short AUDUSD at a better price. That's probably the only way I would "trade" the news spike.
