Our Forex strategists discussed the settings regarding the monetary policy statement from the Reserve Bank of Australia, and the latest inflation updates from the UK.
Of the four scenario/price forecast discussions this week, Only one discussion saw both financial and technical arguments raised To become a potential candidate for a risk management overlay. Check out our review of that discussion to find out what happened!
Watchlists are price predictions and strategy discussions supported by fundamental and technical analysis, and are a crucial step towards creating an account High quality discretionary business idea Before working on a risk management and trading plan.
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AUDJ/JPY for one hour in Forex Chart by TradingView
On Monday, our strategists kicked off the new week with a chat about the Australian dollar. They immersed themselves in the Reserve Bank of Australia’s (RBA) monetary policy meeting, knowing that it could really turn things around for the Australian dollar.
Australia’s inflation growth has been a bit stubborn, so most people expected the RBA to keep things steady this time. But hey, no action doesn’t mean no excitement! We expected that the inflation and economic forecasts they would release after the interest rate statement would likely cause Forex traders to wake up and start a bit of a ruckus for the Australian dollar.
If the whole thing turns out to be just a dovish stance (meaning statements suggesting the RBA is leaning towards looser policy in the future), then we have our eyes set on a bearish bias for the Australian dollar against the New Zealand dollar. The New Zealand Dollar has shown some upward moves recently, making it a good counter strike against the Aussie short position.
But if the RBA came out with optimistic sentiment (eg, “higher for longer” interest rate expectations/potential need for tighter policy), we would focus on a long AUD/JPY mix. The Reserve Bank of Australia and the Bank of Japan have different interest rate levels, plus the pair is trending nicely higher, so a hawkish RBA event could attract both bulls and technical bulls.
Well, the big day has arrived for the Australian dollar, and as expected, the Reserve Bank of Australia kept its policy rate at 4.35% for the sixth consecutive meeting in June. The reaction was unexpectedly weak at first, likely due to traders waiting for the press conference before establishing a biased trend.
This appears to be the case as the AUD/JPY pair rose an hour after the release, likely due to RBA Governor Bullock’s comments that the Governing Council discussed the issue of increasing interest rates due to increased upside inflation risks and inflation expectations. .
Given how this all played out, it is “very likely” that this discussion will be supportive of a net positive outcome as the AUD/JPY pair has risen steadily throughout the week following the RBA event, with little resistance from sellers along the way.
Even after the press conference, traders who jumped into the fundamental and technical buy scenario a little late still had a chance to catch about two moves of the ATR as the pair rose another 150 pips all the way to the end of the week.
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